Interest payments on America’s national debt continue to climb
Image: Farm Credit Illinois
Much like a gambler who’s in deep with Tony Soprano’s crew, America is being forced to dedicate a growing amount of income to paying down interest on its debts.
For the first time in recorded history, the US government is spending more money on interest payments associated with the national debt than both defense and Medicare, according to new Treasury Department data.
By the numbers: Since the current fiscal year began last October, the US government has spent $514 billion on interest payments servicing its national debt, compared to $498 billion spent on national defense and $465 billion on Medicare.
- Interest payments now rank as the second-largest line item in the federal budget, behind only Social Security at $837 billion.
- Overall, the US government has spent $3.82 trillion in the first seven months of this fiscal year, compared to $2.96 trillion in revenue.
The data indicates 2024 will continue a decades-long trend of deficit spending. The US 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 selling Treasury bonds to investors, who expect to be paid back with interest.
- These back payments make up the national debt, which currently sits at $34.6 trillion – or ~115% of America’s annual GDP.
- Total interest payments on the national debt crossed $1 trillion/year at the end of October, up from $475 billion/year as of early 2022.
Looking ahead… Barring any executive or legislative action, interest payments on America’s national debt are projected to consume 35% of all federal revenue by 2053, overtaking Social Security as the largest line item in the budget.
📊 Flash poll: In your opinion, how should the US government deal with its rising national debt and associated interest payments?
See a 360° view of what media pundits are saying →
Sprinkles from the Left
- Some commentators argue that debt is neither inherently good nor bad, so the question surrounding America’s debt isn’t what’s the right level of borrowing – but rather, what’s the economic return on the borrowing or the societal goals it advances.
- Others contend that the US government is currently squandering what might be our last opportunity to get the government’s finances on a sustainable footing in a manner that will minimize the pain.
- “The US Debt Is Now $34 Trillion. Don't Worry. Seriously.” –Claudia Sahm, Bloomberg
- “The economy is strong. Why are our national finances so weak?” –Megan McArdle, WaPo
- “National debt is the greatest threat to our country, it’s time for Congress to act” –Sen. Joe Manchin (D-WV)
Sprinkles from the Right
- Some commentators argue that America in the past gave ourselves permission to incur large amounts of debt because interest rates were low, and many people assumed that things would stay that way – but now that rates are climbing, politicians need to change their tune.
- Others contend that the Biden administration’s overreliance on short-term borrowing is setting up taxpayers up for a painful economic reckoning in the future, when the consequences of their policy manifest themselves.
- “Why Are We Gambling With America’s Future?” –David Brooks, NY Times
- “Janet Yellen’s Risky Debt-Management Business” –Dan Katz, WSJ
- “Congress must restore fiscal sanity and sustainability” –David M. Walker, Washington Times
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