They, meaning Treasury and the Fed, cannot afford any increase in the interest rate, as debt service would soon take up the majority of the budget if rates were to increase by two hundred basis points (2%).
I can see a problem with that once the rubes begin to understand that "the Full Faith & Credit of the Government of the United States of America" is not much different from "The Full Faith & Credit of the One-Eyed Homeless Guy in the Alley Behind Lefty's Bar," but folks who have been predicting for years that the rubes will open their eyes Any Day Now haven't been particularly successful so far.
Increase coupon means increased risk, or it's supposed to reflect that, and in a normal market it would. It also makes the bonds previously issued worth less.
Unfortunately, just conjuring up "money" to pay the increased coupon for that perceived risk at some point becomes a vicious upward spiral, and creditors start to demand higher and higher rates to reflect that, until you go Greek, or Spanish, or Italian-or America in the late 70's.
This time though, there's no way that a Paul Volcker can step in and raise rates to a couple of percent over the real rate of inflation and stop the cycle, as the debts are too large.
There comes a point, called the "bang point", when confidence is lost and you get Weimar. It isn't that far off.
