Annual interest on U.S. debt soars past $1 trillion for the first time in history
11/10/2023 / By Cassie B.
Interest on U.S. debt has soared past $1 trillion for the first time in history, according to calculations from the Treasury.
The estimation is calculated using data on the government’s monthly outstanding debt balance and average interest. The projected amount has doubled during the past 19 months.
This shocking figure comes as interest costs for the fiscal year that ended on September 30 totaled more than $879 billion, which equaled around 14 percent of the government’s overall total outlays.
In addition, the U.S., which already outspends every other country in the world when it comes to national defense, is now spending more money on gross interest on Treasury debt securities than it does on national defense, at $879.3 billion versus $775.9 billion, respectively, for the aforementioned period.
The interest bill is only expected to rise moving forward, and it could do so sharply. As Zero Hedge points out, it only took a month after American federal debt first surpassed $33 trillion to rise by a further $600 billion. This amounted to a total of $33.6 trillion, which is more than the GDPs of Germany, Japan, China and India combined.
Moreover, according to Bank of America’s Michael Hartnett, “the CBO projects that US government debt will rise by $20 trillion next 10 years, or $5.2 billion every day or $218 million every hour!”
Fitch downgraded U.S. credit rating in August
In August, Fitch downgraded the U.S.’s credit rating from AAA to AA+ amid growing concerns about the nation’s debt and finances. It said at the time that there had been a “steady deterioration” in governance in the U.S. during the past two decades.
While the U.S. was once seen as a very secure investment due to its economy’s relative stability and size, political maneuvering related to government borrowing has hurt its standing. The government lifted the debt ceiling to $31.4 trillion in June after a lengthy political battle that nearly pushed the nation into defaulting on its debt.
In a statement, Fitch noted: “The rating downgrade of the United States reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden and the erosion of governance” compared to its peers.
The ratings agency added: “In Fitch’s view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025.”
Some experts predict the rising deficits will force the government to increase its sales of debt securities. Bloomberg Intelligence cautioned: “There will be further increases to Treasury coupon auctions and T-bills outstanding going forward. Besides deficits of over $2 trillion in the foreseeable future, climbing maturities following the increase of issuance from March 2020 will also need to be refinanced.”
Once again, $1 trillion is just the interest payment on the debt and not the debt itself, illustrating just how deep of a hole the U.S. is in right now. The recent surge in deficits is being largely attributed to two significant economic shocks experienced during the past 15 years: the worldwide financial meltdown of 2008 that spurred a major economic contraction and the pandemic and the money the government spent trying to keep the economy afloat in its aftermath.
With the Biden administration spending money carelessly on everything from supporting illegal immigrants and student loan forgiveness to aiding war efforts by Ukraine and Israel, the next round of figures will undoubtedly be even worse.
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