Blog

Government Interest Payments

Government Interest Payments
Profile photo of David Howden

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.

CBO - interest expense

To summarize:

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.).

Blog
Profile photo of David Howden

David Howden is Chair of the Department of Business and Economics, and professor of economics at St. Louis University, at its Madrid Campus, Academic Vice President of the Ludwig von Mises Institute of Canada, and winner of the Mises Institute's Douglas E. French Prize. Send him mail.

More in Blog

stephen-poloz1-300x225

Bank of Canada Raises Interest Rates… Again

Caleb McMillanSeptember 6, 2017

Free the Arctic!

Patrick BarronAugust 29, 2017
peso

Preposterous Bubble Predictions and the Madness of Crowds

Doug FrenchAugust 21, 2017
blowing-bubbles-300x255

The Bond Bubble

Caleb McMillanAugust 16, 2017
immigration

The Reason for Statist Immigration

Caleb McMillanAugust 15, 2017
bitcoin-dollars-300x200

Is Bitcoin a Bubble?

Caleb McMillanAugust 14, 2017

Why Obamacare Repeal Failed

Taylor LewisAugust 2, 2017
Screen Shot 2017-07-25 at 12.27.53 PM

GDP, GPS, & Growth Without Well-Being

Caleb McMillanJuly 25, 2017

The Real EU Aim in Brexit Talks and Why It Will Fail

Patrick BarronJuly 19, 2017