There have been many discussions and debates about the national debt. There has also been a lot of finger pointing between various factions of the federal government. How long will Congress continue to overspend? Will the US ever go bankrupt? To answer these questions, we need to understand a few facts about the national debt.
Data on the National Debt
Here are some important things to consider:
1. The US debt is now over $33 trillion and is fast approaching $34 trillion.
2. The average interest rate on the national debt is 2.97%, according to the Ministry of Finance.
3. On October 31, 2023, former Dallas Fed President Richard Fisher stated that 50% of this debt will mature in the next three years and will need to be refinanced.
4. The refinancing will cause the average debt interest rate to rise, likely above 5.0%.
5. Higher interest payments will further stretch the federal budget and weaken the government’s ability to meet future needs.
In short, as the debt grows, the federal government’s ability to pay its bills will weaken. At some point, America’s credit rating will go down and we will be required to pay a higher interest rate on future debt. The verdict is clear. The budget is on an unsustainable path.
Larger budget funds
Currently, the four largest federal budget expenditures according to usdebtclock.org are: Medicare/Medicaid ($1.47T), followed by Social Security ($1.37T), defense ($826B), and interest on the national debt ($678B). After the debt refinancing, the average interest rate on the debt will increase and it is likely to become the third largest budget expenditure, replacing defense spending.
Current budget deficit
When more money is spent than collected, a deficit occurs. The federal government currently spends about $1.7 trillion more than it takes in. Some members of Congress are sounding the alarm, but most argue about how it’s being spent, rather than asking if it should be spent.
National Debt Outlook
The national debt has exploded in recent years. As of the fiscal year ending 9/30/2019 the federal debt was $22.72 trillion. Today, four short years later, it’s well over $33 trillion. This is an increase of almost 50%. Debt has accelerated at an astonishing rate since Covid-19.
Reasons for the increase in debt
There are other factors contributing to the debt expansion, including the crisis on the southern border. As immigrants flood the US, the costs associated with food, housing, medical care and transportation become burdensome. When the federal government moves immigrants to various US cities, it also shifts the burden of care to municipalities. Unlike the federal government, which can spend more than it takes in, cities and states are required to balance their budgets. So the cost of caring for immigrants has prompted several mayors, from both parties, to express their concern to the White House. This can lead to an increase in money for these cities, which of course increases the budget deficit and debt.
Politics is another key issue for the increased debt. When members of Congress push for more money for their constituents, spending increases. With a lack of fiscal responsibility in Washington, members of Congress have little incentive to cut spending. In fact, Congress will continue to overspend until voters decide to replace them. However, if members of Congress continue to take money for their districts, their constituents will likely continue to re-elect them. After all, how many would be willing to sacrifice their piece of the pie for the good of the nation?
Our legacy of debt
According to usdebtclock.org, the amount of debt per citizen is $100,349. When you include only taxpayers, the figure rises to $259,103. These are staggering figures, which will only get worse if Congress enacts meaningful spending cuts. This is unlikely as few, if any, politicians are willing to risk their re-election bid for the good of the nation.
The longer we ignore congressional overspending, the more pain we will feel when budget cuts are implemented. Unfortunately, in this politically polarized world where it seems every issue is filtered through a political lens, consensus will be hard to find. While term limits would help, it’s unlikely Congress will vote to limit their time in office, especially with so many long-serving members. It is more likely that this issue will continue to worsen until it becomes an immediate threat. Of course, by then, it may be too late.