Uncle Sam has entered the four-comma club
The US government has a loan payment that would make even the most credit card-laden, four-degree-holding millennial blush. The annual interest payments on America’s national debt crossed $1 trillion at the end of October, a figure that’s doubled over the past 19 months, per a new analysis from Bloomberg.
Some quick background: The US government has spent more money than it takes in each year since 2001, including record-setting deficit levels in 2020 ($3.1 trillion) and 2021 ($2.8 trillion). To cover this shortfall, the government borrows money by taking out a second credit card selling Treasury bonds to investors around the world, who expect the US to pay them back with interest.
- These back payments make up the national debt, which currently sits at $33.7 trillion (or ~120% of America’s annual GDP). And, at $1 trillion/year, total interest payments on that debt represent an estimated 3.6% of US GDP.
Over the long term, consistent US deficits lead to increasingly higher interest costs on the national debt. Spending in that area alone is projected to reach $5.4 trillion by 2053, which would make it the single largest line item in the federal budget (surpassing Social Security, Medicare, Medicaid, etc).
👀 Looking ahead… America's debt outlook was recently downgraded from "stable" to "negative" by Moody's credit-rating agency, which cited negative fiscal projections for the near future. The move comes three months after another ratings agency, Fitch, officially downgraded the US’ long-term credit rating for similar reasons.
- Separately, House Republicans unveiled a two-month stopgap funding bill aimed at avoiding a government shutdown, which is scheduled to begin at midnight this upcoming Friday should no deal be reached.
đź“Š Flash poll: In your opinion, how should the US government deal with its rising national debt?
See a 360° view of what media pundits are saying →
Sprinkles from the Left
- Some commentators argue that rising interest rates across the globe have turned America’s national debt into an urgent, must-fix issue, since compounding interest is now working even harder against the country’s fiscal stability.
- Others contend that Democrats should direct their focus towards America’s massive national debt, since it threatens to undermine Biden’s economic achievements and crowd out future progressive priorities due to the massive interest bill.
- “Higher interest rates mean greater danger for U.S. debt” –WaPo Editorial Board
- “Why Democrats Should Care About the National Debt” –Ben Ritz, Progressive Policy Institute
- “Media hysterics aside, the sky isn’t falling on the national debt” –Morris Pearl and Bob Lord, Patriotic Millionaires
Sprinkles from the Right
- Some commentators argue that America’s national debt issue requires serious consideration, but the problem is the only lawmakers beating the deficit drum are far-right House Republicans, many of whom are using their legitimate concern to advance positions on unrelated issues.
- Others contend that the recent explosion in America’s national debt is in large part due to out-of-control government spending during a period of high inflation under President Biden, leaving the US public on the hook for an enormous bill in our future.
- “Our current federal spending is unsustainable. We have to fix that.” –Chicago Tribune Editorial Board
- “How the federal budget deficit doubled under Biden in a single year” –Tiana Lowe Doescher, Washington Examiner
- “Biden’s Deficit Lie, R.I.P.” –Judson Berger, National Review
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