As Debt Rises, the Government Will Soon Spend More on Interest Than on the Military

[FriendlyFire]

But tax cuts pay for themselves /s
Whoever the next Democrat President is screwed with close to 1Trillion in debt repayment per year. The irony is that much of this debt was flushed down the drain on wars and tax cuts for the rich. I suspect that little timmy is about to get it good and hard while Republicans will do everything possible to block tax increases, shut down the government and scream like hycrocrites when the bill come due to be paided.

As Debt Rises, the Government Will Soon Spend More on Interest Than on the Military

The federal government could soon pay more in interest on its debt than it spends on the military, Medicaid or children’s programs.

The run-up in borrowing costs is a one-two punch brought on by the need to finance a fast-growing budget deficit, worsened by tax cuts and steadily rising interest rates that will make the debt more expensive.

With less money coming in and more going toward interest, political leaders will find it harder to address pressing needs like fixing crumbling roads and bridges or to make emergency moves like pulling the economy out of future recessions.

Within a decade, more than $900 billion in interest payments will be due annually, easily outpacing spending on myriad other programs. Already the fastest-growing major government expense, the cost of interest is on track to hit $390 billion next year, nearly 50 percent more than in 2017, according to the Congressional Budget Office.



Deficit hawks have gone silent, even proposing changes that would exacerbate the deficit. House Republicans introduced legislation this month that would make the tax cuts permanent.

“The issue has just disappeared,” said Senator Mark Warner, a Virginia Democrat. “There’s collective amnesia.”

The combination, say economists, marks a journey into mostly uncharted financial territory.

Interest as a Share of the Budget

Interest payments will make up 13 percent of the federal budget a decade from now, surpassing spending on Medicaid and defense.

“When rates went down to record lows, it allowed the government to take on more debt without paying more interest,” Mr. Goldwein said. “That party is ending.”

Deficit hawks have warned for years that a day of reckoning is coming, exposing the United States to the kind of economic crisis that overtook profligate borrowers in the past like Greece or Argentina.

But most experts say that isn’t likely because the dollar is the world’s reserve currency. As a result, the United States still has plenty of borrowing capacity left because the Fed can print money with fewer consequences than other central banks.

https://www.nytimes.com/2018/09/25/business/economy/us-government-debt-interest.html?action=click&module=Top Stories&pgtype=Homepage

 

[warpus]

Who needs roads and bridges anyway, automated flying drone-cars will soon be here driving the American economy forward. You can probably even put lasers on them so that you don't need as big of a military, if China invades all the cars will turn into flying tanks and there you go.

 

[Hrothbern]

The US military defends the US people
The interest on debts defends the US wealthy
Tough choice for Trump

 

[Timsup2nothin]

Unlikely. The cost of the military, just like the cost of everything else, is being driven up. It will probably outpace the costs of interest on the debt, as long as interest rates are kept near zero.

 

[Hrothbern]

Unlikely. The cost of the military, just like the cost of everything else, is being driven up. It will probably outpace the costs of interest on the debt, as long as interest rates are kept near zero.

Near zero ?
Only Switzerland is near zero

 

[Zkribbler]

I remember when George HW Bush balanced the budget...if one ignored the interest doe on the debt Reagan ran up..

 

[Timsup2nothin]

Near zero ?
Only Switzerland is near zero

I'm guessing you are young. Twenty years ago the long term rate that is now approximately 2 was approximately 7, which was down from approximately 10. When I said near zero, I accepted two as qualifying.

 

[Hrothbern]

I'm guessing you are young. Twenty years ago the long term rate that is now approximately 2 was approximately 7, which was down from approximately 10. When I said near zero, I accepted two as qualifying.

ok
somewhere before, around 2000 in most mature economies inflation rates go, are steered towards 2% and debt interests followed that trend down and it is indeed only in the last handfull of years that many countries are around 2%.
I am BTW 62.
The thing is that once your national debt is around 100% of GDP or higher, it really does start to matter whether your interest is 1% or 3%.
You can for example see in the table that Greece interest came down this last year from 5.60% to 4.04%, and at the extreme national debt of Greece of almost 200% of GDP that 1.56% really matters.

 

[Timsup2nothin]

ok
somewhere before, around 2000 in most mature economies inflation rates go, are steered towards 2% and debt interests followed that trend down and it is indeed only in the last handfull of years that many countries are around 2%.
I am BTW 62.
The thing is that once your national debt is around 100% of GDP or higher, it really does start to matter whether your interest is 1% or 3%.
You can for example see in the table that Greece interest came down this last year from 5.60% to 4.04%, and at the extreme national debt of Greece of almost 200% of GDP that 1.56% really matters.

Sure. But that doesn't change the fact that the article about "interest payments will exceed military spending" are using a "near zero" interest rate, be that 2.5 or 2.2 or 1.8, while not accounting for the effects of inflation on military spending. Or accounting for the crazies in power who will use off book military spending to provide Keynesian stimulation while pretending they are interested in reduced government spending to satisfy their idiotic constituents.

In short, I'm not trying to be dismissive about your concern, just challenging the factual basis of the specific "military spending exceeded by interest" statement.

 

[Hrothbern]

Sure. But that doesn't change the fact that the article about "interest payments will exceed military spending" are using a "near zero" interest rate, be that 2.5 or 2.2 or 1.8, while not accounting for the effects of inflation on military spending. Or accounting for the crazies in power who will use off book military spending to provide Keynesian stimulation while pretending they are interested in reduced government spending to satisfy their idiotic constituents.

In short, I'm not trying to be dismissive about your concern, just challenging the factual basis of the specific "military spending exceeded by interest" statement.

Ok and agree

 

[warpus]

Isn't it true that the American military spends a lot more than what is reported? Lots of hidden costs, some bundled in elsewhere, etc.

 

[Timsup2nothin]

Isn't it true that the American military spends a lot more than what is reported? Lots of hidden costs, some bundled in elsewhere, etc.

Depends on what you mean by "reported." A lot more is spent than is shown in the budget, which is a big contributor to the real deficit being so much larger than it is ever "expected" to be, but at the end of the day federal spending is pretty accurately tracked. There may still be some defense spending that shows up as something else though.

 

[Broken_Erika]

You didn't actually think they spent $20,000 on a hammer, $30,000 on a toilet seat?

 

[civvver]

But does it matter? That’s the real question. As long as gdp stays strong enough to keep the dollar strong people will buy our debt.

 

[El_Machinae]

But does it matter? That’s the real question. As long as gdp stays strong enough to keep the dollar strong people will buy our debt.

Well, it only matters insofar as people care about the proportions of where government dollars are spent. Ostensibly, countries could get the same headline by reducing military spending. Canada's military spending and spending on the debt are relatively equal as well.

 

[zxcvbob]

Wait a minute, isn't there another thread about how balanced budgets are actually bad? (it uses the word "fetish") Deficit spending increases the money supply, which is good for everybody! (everybody with a negative net worth because they spent all their money and then some on candy) Yippee!

 

[FriendlyFire]

^ too much debt starts becoming a drag on the economy
Just look at Japan and how its economy is stagnated

 

[Timsup2nothin]

^ too much debt starts becoming a drag on the economy
Just look at Japan and how its economy is stagnated

You say that as if you could provide an indisputable causal link from "too much" debt to economy "stagnated." I find that extremely unlikely, but would be interested in seeing what you come up with.

 

[warpus]

Depends on what you mean by "reported." A lot more is spent than is shown in the budget, which is a big contributor to the real deficit being so much larger than it is ever "expected" to be, but at the end of the day federal spending is pretty accurately tracked. There may still be some defense spending that shows up as something else though.

By "reported" I mean the number you would find if you went to wikipedia and/or read about it in a reputable source of news commenting on some related issue.

I think I remember that the real spending is the reported number + overhead + secret projects + loss due to inefficiencies + afghanistan & iraq combat and other operations

But I'm not American nor a military expert and who knows where I read that

 

[FriendlyFire]

You say that as if you could provide an indisputable causal link from "too much" debt to economy "stagnated." I find that extremely unlikely, but would be interested in seeing what you come up with.

IMF ? Oh I see its what the Debt was used for that is the main issue
The original debt was the economic bubble as the country was awashed in easy credit and frivolous spending. Then came the economic stimulus which has been mis-spent had the Japanese spent their stimulus wisely and actually restarted their economy then the debt wouldnt be an issue. Right now Japanese debt is dragging their economy as government must now raise taxes or/an cut spending