Inflation and the affordability crisis in goods and services garner all the headlines in today’s news feeds… but the ‘interest cost burden’ borne by U.S. Households and the Government sector, as drivers of inflation, are real and far more significant factors in the present crisis than anyone realizes.
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AI review of the literature
Household Interest Cost Burden
1. The Statistical Loophole: Interest is Excluded from CPI
The standard Consumer Price Index (CPI)—the most common measure of inflation—completely excludes consumer borrowing costs like mortgage interest rates, credit card APRs, and auto loan interest. [1]
- The Reason: Central banks view interest as the cost of money, not the cost of a consumer good or service. [1]
- The Irony: When central banks raise interest rates to cool down inflation, they intentionally increase the household debt burden to reduce consumer spending power. [1, 2]
2. The “True” Inflation Impact: Up to 3–4 Percentage Points Higher
Prominent economic research, including a notable National Bureau of Economic Research (NBER) working paper co-authored by former Treasury Secretary Lawrence Summers and IMF economists, sought to recalculate CPI by re-incorporating the cost of money (as was done in the U.S. pre-1983). [1]
They discovered that when interest burdens are factored back in:
- The Peak Discrepancy: During aggressive rate-hiking cycles, “true” household inflation peaked roughly 3 to 4 percentage points higher than official CPI reported.
- The Sentiment Gap: This statistical gap explains why consumer economic sentiment remains historically low even when official inflation reports show a “return to normal”. To the consumer, a 7% mortgage vs. a 3% mortgage feels exactly like inflation—it is a massive increase in the cost of sustaining their life. [1, 2, 3, 4]
3. Real-World Cost Burdens Placed on Households
While it may not show up in headline CPI, the practical cost burden of elevated interest rates alters household budgets in specific ways:
| Debt Category | Real-World Financial Impact |
| Mortgages | Borrowing costs for a standard 30-year mortgage on a median-priced home add roughly $2,500 more per year (or over $75,000 across the life of the loan) compared to low-rate environments. |
| Credit Cards | With average credit card APRs hovering near historically high levels (around 19%–20%), carrying a balance rapidly inflates the cost of daily essentials like groceries bought on credit. |
| Crowding-Out Effect | Research shows that as housing and interest costs spike, consumers are forced into a “crowding-out” trade-off, cutting roughly 39 to 54 cents from essential non-housing consumption for every extra dollar spent on fixed debt costs. |
By the time interest rates peak, nearly 9% of U.S. households find themselves severely strained, spending over 40% of their total income just to service debt repayment. [1]
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Government Interest Cost Burden
The government’s interest cost burden does not directly increase standard consumer inflation metrics, but it creates significant secondary fiscal and financial risks that can fuel long-term price pressures. [1]
In macroeconomic modeling, a structural fiscal shock—such as a permanent primary deficit increase of 1% of GDP (which balloons the government’s interest burden)—is projected to generate inflationary pressures. Over a 5-year horizon, this pressure scales to an indirect household purchasing power loss of $300 to $1,250 per family. [1]
The structural relationship between a rising interest cost burden and inflation operates through distinct channels:
1. The Fiscal Dominance Risk (Monetization)
As net interest payments on the federal debt surge past $1 trillion annually (consuming over 14% to 18.5% of federal revenues), the risk of “fiscal dominance” rises. If the government’s borrowing capacity faces constraints, aggressive measures to suppress bond yields may force the Federal Reserve to intervene. If the central bank is eventually forced to monetize the debt by purchasing government bonds to artificially lower borrowing costs, it expands the money supply and directly drives up inflation. [1, 2, 3, 4]
2. High Rates as a Cost-Push Component
While conventional monetary policy utilizes high interest rates as a contractionary tool to squelch aggregate demand, prolonged high interest burdens create a form of sector-specific cost-push inflation for consumers. For instance, the same 1% GDP fiscal deficit shock pushes up mortgage rates in lockstep with the 10-year Treasury, leading to $600 to $1,240 more in annual mortgage interest payments for average households. [1, 2]
3. Deficit Spills and Demand-Pull Pressures
When a government borrows heavier sums to pay the interest on its existing debt, it injects liquidity back into the hands of private creditors and bondholders. In a supply-constrained economic landscape, this expansionary deficit spending can bid up prices. [1, 2]
Conversely, the relationship also loops backwards: every 1.0 percentage point unexpected increase in the baseline inflation rate eventually forces central banks to raise interest rates, adding roughly $230 billion to $350 billion in annual interest costs back onto the government budget, worsening the overall fiscal trajectory. [1, 2]
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The Leviticus 25 Plan will provide a powerful and comprehensive reset to the debt-driven interest cost burden smothering U.S. Households, Government, and the overall U.S. economy.
The Leviticus 25 Plan will eliminate the vast majority of the interest cost burden for millions of hard-working American families; it will generate federal budget surpluses, $37.303 billion annually, 2027-2031) – and will pay for itself entirely over the succeeding 10-15 years; it will drive rates lower, across the curve, and spur a powerful new economic growth cycle.
It will undergird long-term strength and stability for the U.S. Dollar across global markets, and preserve its purchasing power for U.S. citizens.
The Leviticus 25 Plan is a dynamic economic initiative providing direct liquidity benefits for American families, while at the same time scaling back the role of government in managing and controlling the affairs of citizens. It is a comprehensive plan with long-term economic and social benefits for citizens and government.
The inspiration for this plan is based upon Biblical principles set forth in the Book of Leviticus, principles tendering direct economic liberties to the people.
The Leviticus 25 Plan – An Economic Acceleration Plan for America
$95,000 per U.S. citizen – Leviticus 25 Plan 2027 (72147 downloads )