2011-01-30 19:24:00
CBO Estimates $792 Billion in Total Net Interest Outlays By 2021
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According to the CBO (Congressional Budget Office), the cost to taxpayers of servicing the US national debt (net interest outlays) was $197 billion in 2010.
Net interest outlays mainly consists of the interest that is paid out to the holders of US "public debt". "Public debt" holders consist of mutual funds, foreign governments (China, Japan, UK, etc), individual investors, pension funds, etc.
As of this moment, the United States currently has over $9.4 trillion in "public debt" and an additional $4.65 trillion in "intragovernmental holdings". Combine the two amounts and you are left with the $14.05 trillion in "total public debt outstanding".
"Intragovernmental holdings" is money that the government has borrowed from itself. An example of "intragovernmental holdings"? The government borrowing money from the Social Security fund and then issuing an IOU to itself. This is what the term "intragovernmental holdings" means.
Net interest calculations don't include "intragovernmental holdings", as the government is just paying interest to itself, which results in "transactions that have no effect on net interest or the budget deficit".
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Anyways, now that we have explained that, let's take a look at the CBO's projections for outlays of net interest over the next decade in the country.
As mentioned, in 2010, outlays for net interest in the United States totaled $197 billion. For each dollar in revenues that the United States collected in 2010, 4.6 cents went to pay for interest on the national debt.
In regards to net interest, the country is expected to suffer from a double-whammy over the next ten years.
To start, the CBO projects that the debt that is held by the public will soar from $9 trillion to $18 trillion by the end of 2021.
In addition, the CBO also estimates that interest rates will rise substantially by 2021, which will also help to dramatically increase the cost of servicing the US debt load. Specifically, the CBO estimates that the interest rate on 3-month Treasury bills will rise from 0.25% in 2011 to 4.4% in 2021, and that the rate on 10-year Treasury notes will rise from 3.2% to 5.4%.
A soaring public debt load and rising interest rates? Not a good combination.
Let's look at the CBO's baseline projections of federal interest outlays from 2011 to 2021:
2011 - $225 billion
2012 - $264 billion
2013 - $325 billion
2014 - $394 billion
2015 - $459 billion
2016 - $527 billion
2017 - $592 billion
2018 - $646 billion
2019 - $697 billion
2020 - $751 billion
2021 - $792 billion
So, by 2021, the CBO estimates that the United States will be shelling out $792 billion per year in total net interest outlays. That's a 302% increase from the amount that the United States paid out in 2010.
From 2012-2021, the CBO estimates that the United States will pay out $5.45 TRILLION in total net interest outlays.
Source: CBO.gov - Budget and Economic Outlook: Fiscal Years 2011 Through 2021
Filed under: General Knowledge
1 COMMENT - What Say You?
Comment by matthew on February 10, 2011 @ 2:03 am
I like to read news articles that are two even three years old. I am always able to see how wrong the future interest rate predictions are. I am 42. My whole life I have been told rates are going up next year. Yet for approx. 22 years straight years( my borrowing life )it's been just about the opposite.Prior to 2007 there was a bank on every corner. Commercials every second asking you to take what equity you had out & buy more stuff houses,cars,remodels, etc.etc. Never was the money velocity higher, never where conditions more ripe for inflation. Never where people more liquid. If inflation where to happen it should have been then, not now. Instead, technology and globalization flattened the world and it's interest rates. Now money is not being offered on every corner. Call any lender, ask them for a HELOC. Call your credit card co. ask for a line increase. Real Estate is no longer liquid. Not sure but I believe between Residential and Commercial there is some 30 Trillion of paper. Banks closing not opening?, The FED announcing a plan to pull back Fannie & Freddie paper by 50% over the next 5 years. Please , somebody show me the inflation pressure. Inflation will happen with Job growth, w/ job growth comes wage growth. Last time I checked we are 9 million jobs short of being even. I am not talking about the x hedge fund manager that now greats you at Walmart. You lose 100k lehman jobs, and replace it with? They should put a market cap on the jobs numbers. So when a guy making 100k, then gets the new job at 45k. We don't just read it as job creation. We can see it's deflation.
Can I get paid to do this? Or do I have to be right?, wait,, no.no. I don't have to be right.
I watch - Crammer
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