They aren't wrong, just early. The reasons still hold - if you increase interest rates by 5x while holding the amount of debt constant, debt service costs are

They aren't wrong, just early. The reasons still hold - if you increase interest rates by 5x while holding the amount of debt constant, debt service costs are going to increase 5x. The U.S. currently spends about 13% ($659B, more than Medicaid) of its budget on interest costs; it's roughly double the $345B spent in 2020 (largely because of the higher rates). Go up to the full amount implied by rates and you're spending about $1.6T on interest, more than any other category and about 40% of total tax revenue. It's a similar picture for corporate debt, which is continuing to hit record levels. The missing part of the puzzle is maturity. Most corporations took advantage of the low 2021-2022 rates to roll over their debt into low-interest bonds that mature between 2025-2027. Similarly, the bulk of U.S. government securities have maturities between 2-7 years. So they're insulated from higher interest rates for at least 2 years, and can keep going business-as-usual until then (at which point, they will probably just go bankrupt). If the Fed drops rates before then, they never feel the impact. Of course, the Fed has no incentive to drop rates before then if the economy keeps on humming well and we don't see workers reallocated from zombie companies to sectors that need them, making this a game of chicken between the Fed and corporate debt. It wouldn't surprise me if much of the market predictions for 7 rate cuts this year (while the Fed is insisting on no more than 3) is traders assuming that if they don't start cutting in earnest before the end of this year, lots of companies will go bankrupt next year, and the Fed won't let that happen, so therefore the Fed will cut. Which is logical for traders accustomed to the "Fed put", but I think the days of the Fed encouraging moral hazard might be over.