Government To Shell Out Increasing Amounts of Money as National Debt Swells
As you are likely aware, the US government shells out hundreds of billions of dollars every year to service their growing public debt.
As it stands right now, the total national debt of the United States is a little under $16.48 trillion.
Of this total, roughly $11.6 trillion is in the form of "public debt", while the remainder ($4.855 trillion or so) is in the form of "intragovernmental holdings". "Intragovernmental holdings" is money that the government has borrowed from programs such as the Federal Old-Age and Survivors Insurance Trust Fund and the Civil Service Retirement and Disability Fund.
The $11.6 trillion in "public debt" is money that is owed to pension funds, mutual funds, individual investors, foreign governments, etc. For instance, China owns roughly $1.17 trillion in US debt, and they receive regular interest payments from the US government.
Net interest is the amount of money that the US government shells out every year to service its debt, minus any interest income that the government brings in from loans and cash balances, as well as earnings from the National Railroad Retirement Investment Trust.
According to the CBO, net interest for the 2013 fiscal year is slated to be roughly $224 billion.
In their recently released "The Budget and Economic Outlook: Fiscal Years 2013 to 2023", the CBO made a number of different projections regarding the size of future deficits, the national unemployment rate, etc.
The CBO also released their projections for the amount of money they expect the US government to pay out in net interest going forward.
According to the CBO, the US government will likely pay out $5.41 trillion (in total) in net interest from 2014 to 2023.
Over the same period of time (2014-2023), the CBO estimates that the US government will have $47.2 trillion in total outlays ($28.938 trillion in mandatory spending, $12.852 trillion in discretionary spending, $5.41 trillion in net interest).
Here is a breakdown of the US government's projected net interest costs by year, starting in 2014:
2014 - $243 billion
2015 - $272 billion
2016 - $323 billion
2017 - $412 billion
2018 - $517 billion
2019 - $593 billion
2020 - $667 billion
2021 - $730 billion
2022 - $795 billion
2023 - $857 billion
In 2014, net interest will be 1.5% of the country's Gross Domestic Product. By 2023, this number will jump to 3.3%.
Increasing debt (after all, there are deficits forecast as far as the eye can see) and rising interest rates will conspire to dramatically increase the amount of money that the US government must spend on net interest over the next 10 years.
Filed under: General Knowledge