America’s national debt continues to climb

If America’s finances were an Alfred Hitchcock movie, they would be Vertigo – because Uncle Sam is slowly losing the ability to balance his checkbook.

The US is on pace to add nearly $19 trillion to its national debt over the next decade, with higher interest payments set to account for a historic share of government spending, per a new report from the nonpartisan Congressional Budget Office.

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 Venmo-requesting their parents 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 $34.2 trillion – or ~125% of America’s annual GDP.
• At a projected $1+ trillion/year moving forward, total interest payments on this debt will represent an estimated 3.6% of US GDP.

Over the long term, consistent US deficits lead to higher interest costs on the national debt. Starting in 2025, net interest costs on the national debt will be larger as a share of the US economy than any time since US records began in 1940, per the CBO.

And that’s not all. By 2053, interest payments are projected to reach $5.4 trillion/year – which would make it the single largest line item in the federal budget (surpassing Social Security, Medicare, Medicaid, etc).

👀 Looking ahead… America's rising interest payments are in part due to the Federal Reserve's recent series of interest rate hikes, which resulted in decades-high borrowing costs. The CBO expects the Fed will begin to lower interest rates later this year, but rates in the following years will be "generally higher" than it previously expected.

📊 Flash poll (long-form): In your opinion, how should the US government deal with its rising national debt?

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