US is on track for Treasury to pay $1 trillion just in interest on debt
Latino voters in Arizona discuss rising cost of living in Biden's economy ahead of election
Latino voters in Arizona discussed inflation and the high cost of consumer goods under President Biden in an interview with CBS News on Wednesday.
Interest on the federal debt is exploding much faster than the government predicted. It turns out Congress and the executive branch are as bad at projecting the future as they are at saving money.
Yet much more alarming than the mathematical deficiencies of government is the rate at which America is running out of time to solve its debt crisis.
While the Biden administration had projected a $1.6 trillion deficit for the current fiscal year, the Treasury has been borrowing at a $3 trillion annualized rate — almost twice the projected amount.
BILL MAHER PANICS OVER TRUMP'S GAIN WITH YOUNG VOTERS: BIDEN MIGHT LOSE 'BECAUSE HOT DOGS COST MORE'
This additional debt, issued at today’s interest rates, will increase the Treasury’s annual interest expense by over $100 billion.
Higher interest rates mean the US is set to pay $1 trillion a year just in debt service. (iStock)
But today’s relatively high interest rates affect much more than just current deficit spending. This is because America doesn’t actually pay off debt, but only rolls it over.
When it’s time to repay old debt, the Treasury simply issues new debt to cover repayment of what was originally borrowed, plus the accrued interest that’s due. How much debt is being rolled over in 2024? About $8 trillion worth.
All the Treasury bills being rolled over were issued within the last year, so they already have relatively high rates of interest — but not the Treasury notes or bonds, which were issued between two and 30 years ago. Much of that debt has an interest rate about half of current rates. As these notes and bonds are rolled over, the interest expense of the Treasury will continue skyrocketing.
I had previously warned that America would be spending a record amount of her national income to service the debt by 2025. Now even the Biden administration’s Office of Management and Budget agrees with that forecast.
Between new debt issued to cover current deficits and old debt being rolled over, the Treasury will auction about $10 trillion of debt this year, much of it having an interest rate of about 5%. This is less than one third of the federal debt but will cost $500 billion annually to service.
The rest of the debt, about 70%, will cost another $500 billion annually because the interest rates on the remaining notes and bonds are still relatively low. While that buys America some time to try and diffuse this debt bomb, it still means we’re paying over $1 trillion a year just in interest on the debt.
This is already the federal government’s third-largest single line item in the budget. It will grow to first place in just a few years. Interest on the debt is now so large that it exceeded 60% of all personal income taxes collected in February. This is the Treasury’s largest source of tax receipts, and most of it is being consumed by interest.
CLICK HERE FOR MORE FOX NEWS OPINION
Taxpayers would do well to ponder that point. We’re talking about interest payments, not schools, not roads or bridges, not hospitals, not the military and not Social Security — just interest. The government is increasingly digging itself into a hole which will eventually prevent it from funding any other expenses.
Imagine a family that constantly spends more than it earns and uses debt to finance its profligate spending. All those debts accrued by the family carry interest payments which grow larger and larger. If they don’t course correct, the cost of servicing their debt will eventually exceed their income.
That’s when the family is locked into a debt death spiral from which they will never escape. Interest consumes their entire income, leaving nothing for necessities like food, clothing or rent. America is rushing headlong to this point of no return as multi-trillion-dollar deficits as well as maturing debt are all being issued at higher interest rates.
Unfortunately, most people aren’t paying attention because so-called fiscal conservatives spent the last four decades acting like the boy who cried wolf and repeatedly claiming this debt death spiral was imminent. Decades of artificially low interest rates hid the true cost of government deficit spending and turned prophecy into hyperbole.
The desensitized public is unfortunately numb to the warnings, but they need to wake from their slumber because the day of reckoning is fast approaching. There’s not much time left to cut spending.
CLICK HERE FOR MORE FROM E.J. ANTONI
E. J. Antoni is a research fellow for regional economics in The Heritage Foundation’s Center for Data Analysis and a senior fellow at Committee to Unleash Prosperity.
