- The US government could spend more on debt than on the military, with interest payments expected to make up 13% of the federal budget within a decade, The New York Times reported.
- The increase in borrowing costs was caused by a need to finance a rapidly growing budget deficit, made worse by tax cuts raising interest rates.
- Interest costs are expected to reach $390 billion next year, nearly 50% more than in 2017, and are already the fastest growing government spending, the Congressional Budget said. Office.
- The deficit is skyrocketing despite a booming economy, a situation that economists see as uncharted territory.
The US federal government may soon be spending more on interest on its debt than on the military, The New York Times has reported.
Interest payments are expected to make up 13% of the federal budget a decade from 6.6% in 2017. Tax cuts, increased spending and rising interest rates will make it harder to meet future recessions or spending on other needs, says the Times.
More than $900 billion in interest payments will be due each year within a decade, exceeding increases in government military spending, according to the Congressional Budget Office.
“It’s really something to be concerned about,” C. Eugene Steuerle, a fellow at the Urban Institute and co-founder of the Urban-Brookings Tax Policy Center in Washington, told The New York Times. “Everything else is in a hurry.”
Interest costs are expected to reach $390 billion next year, nearly 50% more than in 2017, and are already the fastest growing government spending, the Congressional Budget said. Office.
Rising interest rates would have made the nation’s debt more expensive even without additional debt. But the tax cuts voted at the end of 2017 increased the pressure on the federal budget and widened the deficit.
Next year, the deficit is expected to reach nearly $1 trillion, the first time it has been this large since 2012, when the United States was still recovering from the financial crisis and rates were near zero.
In February, a bill was approved to increase federal spending by $300 billion over 3 years, which will further increase the financial burden. The Congressional Budget Office said interest payments on the national debt are expected to triple over the next decade.
And Republicans in Washington introduced legislation this month that would make the tax cuts permanent.
“The problem just disappeared,” Sen. Mark Warner, a Democrat from Virginia, told The Times. “There is a collective amnesia.”
Marc Goldwein, senior policy director at the Committee for a Responsible Federal Budget, told The Times: “By 2020, we’ll be spending more on interest than on children, including education, food stamps and aid. to families.” The committee is a research and advocacy organization.
Historically, government borrowing has increased for
and dropped during recoveries. Today, the deficit is exploding despite a booming economy. This means that there would be less room for reaction in the event of a further slowdown.
The situation represents a trip into mostly uncharted financial territory, economists told The Times.