(by Dr. Goldfinger)

Rising interest rates can lead to increasing costs of debt services, analysts say. This also can cause the increasing of net interest paid annually to investors, they add.

In the 2004 budget year ending September 30, net interest paid by the federal government on its debt lifted, for the first time since 1997. The Office of Management and Budget expects net interest to hit $292 billion as soon as 2009. Another government organisation – the Congressional Budget Office says net interest will stop at $302 billion in 2009 and $348 billion in 2014.

"There’s no stress on the economy to finance these interest payments. But we still want them lower," said Tim Bitsberger, an assistant secretary for financial markets at the Treasury Department.

The U.S. is quite loved by the foreign investors as about 50% of all privately held U.S. debt is owned by them. That can raise worries as the economy appears to be more vulnerable, officials say.