Rising Federal Debt Adds Another Variable to Business Capital Planning
The nation’s growing debt burden is typically viewed as a government finance issue. For businesses, however, its potential influence on interest rates and capital markets makes it worth watching.
Federal debt held by the public is now roughly equal to the size of the U.S. economy. The Congressional Budget Office projects that it will rise from 101% of gross domestic product in 2026 to 120% by 2036 under current law.
At the same time, policymakers are looking toward stronger economic growth – including potential productivity gains from artificial intelligence and increased manufacturing investment – as one factor that could improve the country’s fiscal outlook.
For finance leaders, both sides of that equation have implications for capital planning.
Government Borrowing Can Reach Private Markets
Large federal deficits require the Treasury to issue substantial amounts of debt. Over time, growing government borrowing can contribute to pressure on interest rates as Treasury securities compete with other investments for capital.
CBO currently projects the 10-year Treasury yield to average 4.1% in 2026 and remain above 4% throughout its 10-year forecast.
That matters because Treasury yields serve as an important benchmark throughout financial markets. When the cost of capital remains elevated, financing expenses for businesses can face similar pressure.
For companies considering equipment purchases, that reinforces the importance of evaluating financing costs as part of a broader capital strategy rather than assuming today’s rate environment will necessarily be temporary.
Growth Requires Investment
There is another side to the story.
Artificial intelligence, reshored manufacturing and other productivity-enhancing investments have the potential to increase economic output. CBO has already raised its projection for the size of the economy in 2035 partly because it expects greater business investment related to AI infrastructure and intellectual property.
But achieving higher productivity requires businesses to invest first.
Manufacturers may need automation and production machinery. Data centers require servers, cooling systems and electrical infrastructure. Contractors supporting new facilities need vehicles and heavy equipment. Across these industries, economic growth ultimately depends in part on businesses being willing and able to deploy capital.
Focus on the Economics of the Investment
Federal debt, economic growth and long-term interest rates are difficult for any business to forecast. Equipment requirements are often much easier to identify.
Finance leaders can evaluate whether an asset will increase capacity, improve productivity, reduce costs or generate additional revenue. They can then compare that expected benefit with the cost of acquiring and financing the equipment.
That approach becomes increasingly valuable when the broader economic outlook is uncertain.
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Disclaimer: This article is provided for general informational and educational purposes only. It may reference or incorporate information reported by third-party news organizations, financial publications, industry sources, and other publicly available sources. Fidelity Capital Partners, LLC does not independently verify all third-party information referenced, and such information may be incomplete, subject to revision, or change over time. Any analysis or commentary provided by Fidelity Capital Partners, LLC reflects our interpretation of the information available at the time of publication, including its potential relevance to equipment financing, leasing, capital planning, and related business decisions. Nothing in this article constitutes financial, legal, tax, investment, or other professional advice, nor does it constitute an offer or commitment to provide financing.
