Submitted by David Howden via Mises Canada,
It’s not just homeowners who have to worry about rising interest rates, the Federal government might soon get a taste of its own medicine.
With the Fed doing all it can to stimulate inflation, increases to interest rates are taking a front seat amongst borrowers’ fears. From the admittedly partisan Republican Senate Committee on the Budget comes this report outlining how federal interest outlays will dovetail with other expenses in the future.
The U.S. gross federal debt currently stands at $17.548 trillion, and net interest payments to our creditors are the fastest-growing item in the budget. In 2014, the Congressional Budget Office projects that the nation will spend $233 billion on interest payments. By the end of the budget window in 2024, however, CBO forecasts that interest payments will nearly quadruple to an astonishing $880 billion. Every dollar spent paying our creditors is a dollar wasted—money for which we get nothing in return. Interest payments threaten to crowd out every other budget item.
To put the $880 billion, single-year interest payment in perspective, here is what we currently spend on other budget items:
Federal Courts – $7.4 billion
Department of Education – $56.7 billion
Secret Service – $1.8 billion
Food Inspection – $2.3 billion
Census Bureau – $1.0 billion
Border Patrol – $12.3 billion
National Parks – $3.0 billion
NASA – $17.6 billion
Centers for Disease Control – $7.1 billion
Federal Prison System – $6.9 billion
Workplace Safety Inspections – $0.9 billion
Immigration and Customs Enforcement – $5.6 billion
FDA – $2.6 billion
Federal Highway Budget – $40.4 billion
Coast Guard – $10.0 billion
Small Business Loans – $0.9 billion
Veterans’ Health Care – $55.3 billion
FBI – $8.3 billion
Every debt incurred today will be paid off in the future. The graph above may be shocking to some, but it’s only a very small part of the picture. This is just interest on debt, and doesn’t even include the costs of repaying the principal. Of course, the principal never really gets repaid as the government just borrows afresh to paper over its old debts, but the interest must be covered lest savers stop lending money to the government.
Nor is this only a concern for the future. Last year the government spent more on interest payments (c. $700 bn.) than it did on Medicare (a little under $600 bn.).