FEB 24, 2023
One of the fastest-growing expenditures over the next decade will be net interest on the national debt, according to the latest projections from the Congressional Budget Office (CBO). In total, net interest will amount to an eye-popping $10.5 trillion over the next decade.
After jumping from $352 billion in Fiscal Year (FY) 2021 to $475 billion in 2022, annual net interest outlays will triple, reaching $1.4 trillion by 2033. As a share of the economy, net interest will rise from 1.9 percent of Gross Domestic Product (GDP) in FY 2022 to exceed its record as a share of GDP – 3.2 percent set in 1991 – by 2030 before reaching a high of 3.6 percent of GDP by 2033.
To put this $10.5 trillion total in perspective, this means that spending on net interest will exceed all defense spending over the next decade. In addition, we estimate the net interest spending will surpass all federal spending on children this year, meaning that we will be paying more to service our debts of the past than to invest in future generations.
For every dollar that the U.S. government will borrow over the next decade, 50 cents will be just to pay interest on our national debt.
Unfortunately, the decades to follow 2033 are projected to be in even worse fiscal shape. With deficits continuing to grow unsustainably over time, interest on debt will eventually become the largest part of the federal budget. Net interest will surpass defense spending by 2028, Medicare spending by 2044, and Social Security spending by 2050, becoming the largest single line item in the budget. By 2053, net interest will consume approximately 7.2 percent of GDP – nearly 40 percent of federal revenues.Committee for a Responsible Federal Budget
Who receives those interest payments?
Foreign governments, pension plans, state and local governments. Individual investors, federal government trusts.
Why aren’t our politicians, especially progressives, Tweeting about this?
Three choices to close the gap and cover the interest expense:
Raise taxes on pretty much everyone,
Lower federal spending,
Monetize the debt.
Congress’ history suggests the only alternative they would vote for is #3 – so, the Fed won’t succeed if there is no fiscal discipline. That is one major reason why we have yet to see a recession – despite the interest rate changes – folks still have excess “savings” due to dampened demand during COVID coupled with supply change disruptions and government largesse.
Default is one of the 3 options for dealing with the debt but I don’t think the President dares go there. Raising taxes is always suggested but the pols can’t be trusted to pay debt with a tax increase, they act like children in the candy store and spend more. The debt only increases. We have to be content with inflation, the third option, although the fed says they will control it.
Why aren’t our politicians, especially progressives, tweeting about this? Because they believe that the President can sign an executive order and just wipe out the debt he did for student loans unless the SCOTUS stops him.