Interest costs now second largest federal spending category; payments are financed by taking on more debt.
According to the report, the federal government spent $682 billion in “net interest” payments so far this fiscal year (which ends Sept. 30). That’s more than all the money spent on “health” ($670 billion), national defense ($644 billion), and income security — which includes payments to the poor ($508 billion).
Another way to think about it: the federal government is currently sending 34 percent more money to the bondholders of federal debt than it is to the nation’s poor.
The only thing that beats net interest costs is Social Security, which has doled out $1.1 trillion to date.
This is a sharp departure from even the recent past. Last June, interest on the debt was the sixth largest outlay. At the start of this year, it was the fourth biggest spending program. By May it had crept up to third.
The reason for the explosion in interest costs: the combination of a massive increase in the federal debt combined with high interest rates that Biden’s spending spree produced.
And here’s the kicker: All of those interest payments are being deficit-financed. We are borrowing money to pay interest on existing debt.
According to Treasury, the federal deficit is just shy of $1.3 trillion this fiscal year. Treasury expects the deficit to reach $1.9 trillion by the time the fiscal year is over, which is up from $1.7 trillion last year and $1.4 trillion the year before that.
It doesn’t take a financial genius to see where this leads.
This, as much as anything else, is Biden’s real legacy.
It was Biden who, while selling his massive $2 trillion “rescue plan,” said on Feb. 5, 2021, that “The way I see it, the biggest risk is not going too big. It’s if we go too small.”
Biden could not have been more wrong, and we are all paying the price.
— Written by the I&I Editorial Board
Originally published by Issues & Insights. Republished with permission.
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