Interest On Our National Debt : It’s Becoming The Largest Line Item In The Federal Budget
March 24, 2024
Interest On Our National Debt
It’s Becoming The Largest Line Item. In The Federal Budget
I just recently took the time to check on the level of The US National Debt. What I found was that as of March 18, 2024 our National Debt had grown to a whopping $34.5T. (The T stands for trillion). I also discovered that our annual budget deficits for FY 2023 and FY2024 were $1.375T and $1.7T respectively. The projected deficit for FY2025 will be a modest $1.5T.
Here is the scary part. It is also projected that by FY 2033 that the level of the US National Debt will balloon to $50T.
I would not be surprised to find out that the $50T figure quoted above will wind up being significantly understated. That said, I shudder to think what the annual interest expense on our debt would be at that point. That of course assumes that the US is still solvent and that we are still a sovereign nation. Incidentally, the sources for the numbers quoted above were The Congressional Budget Office (CBO), Bipartisan.org, and Congress.gov.
I was also able to find out that the interest expense on the US debt for FY 2023 was $659B. Also, projected interest expense for FY 2024 and FY 2025 will be $870B and $951B respectively. If you do the math you will find that the cost of servicing our National Debt increased by 44% between FY 2023 and FY 2025. If interest expense were to increase by the same percentage, the government’s cost of borrowing money would grow to $1.369T in FY 2027. That’s an awful lot of money for our government to spend on interest expense.
Even if these numbers are somewhat overstated, this reckless accumulation of debt will eventually lead to our undoing as a sovereign country. As I have written previously, “Bankrupt countries cannot defend themselves.”
The numbers quoted above for interest expense are approximately equal to what this country spends on our National Defense. Also, as you can see from the trajectory of the annual amount spent on interest, it’s only a matter of time before the interest expense on our debt will not only exceed our spending on National Defense, but every other line item on the US Federal Budget. This should serve as a wake up call for our elected officials, the American taxpayer, and everyone who is allowed to vote in this country. If we are unable to end the borrow and spend mentality that exists in this country, the US will ultimately wind up shooting itself in the foot financially.
Forgive me for questioning the wisdom of our elected officials on both sides of the aisle, but it seems to me that Congress as a whole, and the most useless occupant of the oval office in our history, could exercise just a modicum of fiscal restraint by lowering our federal budget deficits. This would at least present the appearance of being fiscally responsible.
What makes this mismanagement of our country’s finances even more egregious is the fact that we are borrowing 100% of the $870B that we will spend on interest expense during FY 2024. This will account for 52% of the $1.7T budget deficit for FY 2024. Eventually this blatant disregard of fiscal responsibility will cost the US and its citizens dearly. This entire scenario is just another example of our elected con artists promising us everything and giving us mismanagement and more debt. These hustlers, who we have elected, are costing taxpayers hundreds of millions per year or more, in salaries, staff, and travel and are doing little more than kicking the can down the road. They continue to squander taxpayer funds on pet projects and are not doing the job that they were elected to do, which is to properly manage the financial resources of the United States.
This increase in the amount of interest expense paid annually by our government will result in serious consequences for a significant percentage of US citizens and the country as a whole. As the amount of interest steadily increases, the amount of money spent on other areas of the federal budget will have to be reduced. The only other options that I can see are to borrow more money, raise taxes, or cut spending.
A Look at National Debt and Government Bonds - Today, the federal government debt is a result of accumulated budget deficits.
Borrowing more money is what got us into this situation in the first place and would only serve to make matters worse. Raising taxes is the other option open to our elected leaders. Some of those who would vote in favor of that would likely be voted out of office. Since being reelected is the primary goal of most politicians, it would be my guess that raising taxes, at least at this point, would not be on the table.
One area of the budget that would have to be reduced would be defense spending. This would obviously put the US and its allies at a higher level of risk from our enemies. Entitlements such as Food Stamps, Social Security, and Medicare payments would also need to be reduced. It would not be a stretch to say that a large number of retired people who have paid into these programs over their working careers, and depend on these programs for their survival, would be greatly upset if these benefits were to be cut.
One other point that I want to make is that this massive level of debt that the US has accumulated by this gross mismanagement of our elected representatives will never ever be paid off. Our government will continue to borrow and squander more and more money and pay higher and higher amounts of interest expense every year without ever paying down so much as one dollar of the principle.
I say this because when the government borrows money it’s not like you or I or any other American borrowing money. When you or I borrow money we usually have to pay both principal and interest. There are also limits to the amount of money that a bank or other financial institution would be willing to lend to an individual. The government, on the other hand, is under no such constraints, nor is it mandatory for it to pay down the principle. The government can just pay the interest on the debt and let the principle slide indefinitely.
I should probably explain what I mean by the word indefinitely. Suppose $10B worth of Treasury Bills come due on June 30th, 2024. Those T-Bills have to be repaid on time; but not really. The government will sell new debt in the amount of $10B. This will be used to pay off the old $10B in T-Bills. So the old $10B is actually replaced with new debt and the government still owes the $10B in debt. So the old debt of $10B is paid off, but not really. More accurately, it is replaced with the new debt.
There is one other consequence of this massive accumulation of US debt that I want to touch on and that is the devaluation of the US dollar. The more US currency that is printed by the Federal Reserve and loaned to the US Treasury, the less valuable the US dollar will become.
There are several ways to describe what happens to the US dollar when the government decides to print money and loan it to itself. This happens when the Federal Reserve prints money and loans to the US Treasury.
One of the side effects of the Fed printing money is that the dollar becomes deflated. Put another way, one could say that the dollar becomes less valuable as the buying power of the dollar is reduced. These are just different ways of describing the exact same phenomenon which is inflation. Put simply, when inflation occurs it takes more dollars to buy the exact same goods and services than it did before the onset of inflation.
Inflation impact the value of the U.S. dollar
In the beginning of this post I mentioned that the US National Debt had reached $34.5T and also that our annual budget deficits were now consistently running in the $1.5T range. One other fact that I consider to be extremely relevant to this topic is that interest expense on the debt for FY 2024 will be $870B. This number will increase every year at an increasing rate unless the cost of money goes down.
Another fact that I consider to be relevant to this discussion is that borrowing the interest expense on the US National Debt, will cause our debt to grow that much quicker. This being the case, it will soon become the largest line item in the federal budget, surpassing spending on defense, Social Security, and Medicare. Not only is the mismanagement of our country’s finances unconscionable and a betrayal of the US taxpayer, it also puts the safety and security of our country at risk.
The US currently possesses the most powerful military on this planet. How long do you think the US would remain a free and sovereign nation if our military were allowed to degrade due to lack of funding? It is my belief that it would not take most people more than about 3 seconds to come up with the correct answer to that question.
One side of the aisle believes that if our military was allowed to become weak, the US would become vulnerable and could eventually be taken over by our enemies, of which there are several. These people, of which I am one, advocate for a strong defense to prevent that from ever happening. Back in the days of Ronald Reagan this strategy was called, “Peace through strength.”
Those on the other side of this issue say that spending hundreds of billions per year on National Defense is unnecessary and that this money would be better spent on social programs such as welfare, food stamps, and government housing, just to name a few.
What those on this side of the argument fail to understand is that if the US were ever to be taken over by our adversaries (China, Russia, North Korea etc.) life in America, as we know it, would come to an end. The other fact that I believe most people are completely unaware of is that it would be extremely difficult, if not impossible, to overcome and dislodge those who would take control of the country. There would not be a rebellion of young patriots, such as the uprising that occurred in the Star Wars movies. The country would remain under the control of “the evil empire” indefinitely.
In fact, as I see it, the only shot we would have would come from that segment of our population who have chosen to arm themselves. A short time ago I read an article that stated that there were currently 500M privately owned firearms in this country. As many of these firearms are registered with state and local governments, there would be only a small window of opportunity to fight back before those guns were confiscated by our oppressors.
I bring this up because according to The Center for Immigration Studies, Homeland. Gov, and House.gov, as of June 2023 there were at least 17M illegal immigrants living in the US, with more streaming across both our northern border as well as our southern border everyday. Further, as of November 2023 these uninvited border crashers were costing the US taxpayers $451B per year. Unless the idiot in chief and all the lesser idiots that he has surrounded himself with, put a stop to this invasion of illegal migrants into our country, the number of illegals entering our country will continue to grow as will the amount of taxpayer funding that will be necessary to support this uninvited mass of humanity.
Just to be clear, and this gets back to the topic I was discussing earlier, every penny of the money needed to support these uninvited, unwelcome guests will need to be borrowed. This will only serve to put the US further and further into debt thus increasing the amount of interest we will need to borrow and pay annually.
Allowing these unvetted immigrants into our country is also a National Security risk. Although I am unable to recall the source, it was recently reported on a network newscast that the US is receiving illegal immigrants from as many as 150 different countries. If this onslaught of illegal, unvetted immigrants doesn’t scare you, it should. Also reported by the same outlet was that roughly 20K single, military aged men from China have been let into this country over the last several months. I would bet the farm that some of these Chinese immigrants are actually Chinese military posing as immigrants.
In addition to members of the Chinese military entering our country, how many of these immigrants are terrorists from other countries sent here by their governments to do us harm? We have no way of knowing who these people are or what their motives are for coming to this country. This is due to the fact that most of these people are unvetted.
Our country is unsecure. This is not what our leaders should be doing to protect the citizens of this country. We are leaving ourselves wide open to an attack and that attack may well come from within. I for one am not comfortable with our current state of readiness. We are allowing thousands of people into our country and we have no idea who they are or what their intentions are. I fear that our lax border policy and our lack of vision will result in the US paying a horrific price: a price that we may not be prepared to pay.
I don’t blame the immigrants for this debacle. I blame our elected leaders and the American electorate. After all, it was “we the people” who put this addled, demented old man in the White House and it is “we the people” who will ultimately bear the responsibility for this decision if it comes back to haunt us in the future.
I’m going to close with this question. What will happen to all of the illegal immigrants when the US is no longer able to borrow the money to pay for their support? As the US continues to borrow more and more money, the value of the US dollar will become less and less. What this means is that as the value of the US dollar becomes less and less valuable our government will have to borrow more and more dollars to pay its bills.
In case you haven’t noticed this will become a vicious cycle. The more our government prints and borrows, the less valuable the dollar will become. The less valuable the dollar becomes, the more dollars our government will have to print and borrow to pay its debts.
Eventually this “borrow and spend” madness will all end when the dollar becomes virtually worthless. When that happens illegals will not be able to afford to live here. That will apply to everyone else as well, including US citizens. For all intents and purposes cash money will be worthless. If and when that happens the US may be forced to return to a barter system.
Government spending could lead to more government
The good news is that at the end of 2024 we have the chance to elect a conservative President and Congress. Whoever that Conservative President might be, he will at least be able to close down the border and stop the bleeding before it gets any worse. I am unable to say whether or not this will solve the problem. By the time our government gets through all the legal wrangling it may be too late. It may already be too late. The US will have fallen victim to its own stupidity and bad judgment.
Well, we had a really good run for 250 years. I guess all good things eventually come to an end. It was great while it lasted.