Friday, September 20, 2024

How Long Before The Bubble Bursts? Federal Interest Payments Top $1 Trillion


How Long Before The Bubble Bursts? Federal Interest Payments Top $1 Trillion
JOSHUA ARNOLD



One trillion dollars: that 13-digit figure is how much the U.S. federal government is paying annually in interest -- not principal, just interest -- on its debt. 

The money owed in interest is only about 3% of the total debt. "We're over $35 trillion in debt right now," said Heritage Foundation Research Fellow E.J. Antoni on "Washington Watch" last week, and "we're going to hit $36 trillion before the end of the year."

"Trillion" is a word most people reserve for discussing the superlatively large, small, or old. It's a number so large most people can't comprehend it. Approximately one trillion feet will take you from the earth to the sun and back again. The largest atomic nucleus spans approximately a trillionth of a meter (or yard). One trillion seconds ago was eight times further in the past than Abraham's lifetime, likely before the universe began (on any young-earth time estimate).

And now, "trillion" is the number of dollars the U.S. federal government owes in interest in a single year.

The U.S. Treasury Department reported on Thursday that the government has spent $1.049 trillion in interest payments over the past 11 months (since October), 30% higher than the same period last year. (To belabor the point, those decimal places, ".049," represent $49 billion!) The Treasury Department expects to pay out $1.158 trillion on interest over the full fiscal year.

The mindboggling benchmark overstates the true state of affairs, but only marginally. In addition to its staggering debt burden, the federal government also earns interest on investments. After taking these into account, the government's net interest payments total $843 billion, or just under $1 trillion. This caveat is brought to you by the same administration that touted the 16 cents you allegedly saved on your 2021 Fourth of July cookout, and it will likely comfort the same people who were satisfied then.

One result of the government's Benjamin-bill bonfire is that "The net interest payments made by the government now exceed government spending on every other category except Social Security and Medicare," noted former congressman and Family Research Council Action President Jody Hice. Interest payments are now more than defense spending, and are also more than non-defense discretionary spending.

"We have seen this trajectory for a very long time," Antoni responded. "We essentially knew that these very bad numbers were coming." True, but they got here faster than expected. In February 2023, the Congressional Budget Office predicted that interest payments would surpass defense spending in 2028. That morose milestone materialized an entire presidential election cycle too early.

Rising interest payments didn't cause America's debt crisis, but they can make it worse. For decades, unsustainable entitlement programs have been a ticking time bomb with no politically survivable solution.

The interest payments also "account for about half of all personal income taxes collected" this fiscal year, noted Antoni. So, readers can "look at their latest pay stub, see how much they're paying in federal income taxes, and realize that half of that is getting eaten up just by interest payments," he explained.





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