There has been much discussion and debate about the national debt. There has also been widespread criticism among various factions of the federal government. How long will Congress continue to overspend? Will the United States go bankrupt at some point? To answer these questions, we need to understand some facts about the national debt.
National Debt Facts
Here are some important facts to consider:
1. U.S. debt now exceeds $33 trillion and is quickly approaching $34 trillion.
2. The average interest rate on the national debt is 2.97%, according to the Treasury Department.
3. On October 31, 2023, former Dallas Fed President Richard Fisher said that 50% of this debt will mature in the next three years and will need to be refinanced.
4. Refinancing will cause the average interest rate on the debt to increase, likely above 5.0%.
5. Higher interest payments will further strain the federal budget and weaken the government’s ability to meet future needs.
In short, as the debt increases, the federal government’s ability to pay its bills will weaken. At some point, America’s credit rating will be reduced and we will be forced to pay a higher interest rate on future debt. The verdict is clear. The budget is on an unsustainable path.
Most important budget items
Currently, the four largest expenditures in the federal budget according to usdebtclock.org are: Medicare/Medicaid ($1.47 billion), followed by Social Security ($1.37 billion), Defense ($826 billion ) and interest on the national debt ($678 billion). Once the debt is refinanced, the average interest rate on the debt will increase and it will likely become the third largest budgetary expenditure, replacing defense spending.
Current budget deficit
When more money is spent than collected, a deficit results. Currently, the federal government spends about $1.7 trillion more than it collects. A few members of Congress are sounding the alarm, but most are arguing over how the money is spent, rather than whether it should be spent.
Perspective on the national debt
The national debt has exploded in recent years. In the fiscal year ending 9/30/2019, the federal debt was $22.72 trillion. Today, four years later, it is well over $33 trillion. This is an increase of almost 50%. Debt has accelerated at a staggering rate since Covid-19.
Reasons for increasing debt
There are other factors contributing to the debt expansion, including the crisis at the southern border. As immigrants flood the United States, costs associated with food, housing, medical care, and transportation become onerous. When the federal government transports immigrants to various American cities, it also shifts the burden of care to municipalities. Unlike the federal government, which can spend more than it collects, cities and states are required to balance their budgets. Thus, the cost of caring for immigrants has led several mayors from both parties to express their concern at the White House. This could lead to an increase in financial resources for these cities, which of course would increase the budget deficit and debt.
Politics is another key factor in the increase in debt. When members of Congress push for more money for their constituents, spending increases. Because of Washington’s lack of fiscal responsibility, 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 get money for their districts, their voters will likely continue to re-elect them. After all, how many would be willing to sacrifice their share 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 only taxpayers are included, the amount rises to $259,103. These are staggering numbers, and will only get worse unless Congress enacts significant spending cuts. This is unlikely, as few, if any, politicians are willing to risk re-election for the sake 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 like every topic is filtered through a political lens, finding consensus will be difficult. While term limits would help, Congress is unlikely to vote to limit their terms, especially with so many long-serving members. It is more likely that this problem will continue to escalate until it becomes an immediate threat. Of course, by then it might be too late.