What Interest on the US Debt Would Buy

The New York Timesran with this front-page story this week:

“With the national debt now topping $12 trillion, the White House estimates that the government's tab for servicing the debt will exceed $700 billion a year in 2019, up from $202 billion this year, even if annual budget deficits shrink drastically. Other forecasters say the figure could be much higher.”

The problem: The Timesunderstated the annual interest by more than $180 billion.

For fiscal year 2009 the federal government paid $202 billion in interest on the public debt.

But that figure doesn't include interest paid on intragovernmental holdings, primarily composed of Treasury securities held by the Medicare trust fund and Social Security trust fund.

Total interest on the debt that includes intragovernmental holdings is $383.3 billion, says Fox News analyst James Farrell. That equates to the gross domestic product of Malaysia or Belgium.

Breakdown of Total Debt

Sources: Treasury Dept.; DOT Budget Climbs to $73.3 Billion for 2010; CBO Monthly Budget Reports; CBO'S Budget and Economic Outlook: An Update

What Interest on the Federal Debt Will Get You

The $383 billion total in interest paid annually on the federal debt is equal to the size of Norway's sovereign wealth fund, one of the largest in the world.

It's the amount estimated to be the value of all Internet content as of 2007, the latest data available from web reasearchers Outsell Inc. The $383 billion equals the amount the US government spent on its computers and data systems in fiscal 2005.

It's 49% more than the estimated cost for Japan's last stimulus package in December 2008, and it's what Nigeria has lost to theft and waste in the last 46 years.

The total $383 billion in interest on the federal debt would pay for slightly more than half of the Defense Department's budget ($674.7 billion in FY2008). It would pay for just shy of half the annual budgets of Treasury ($751.2 billion) and Health and Human Services ($721.7 billion).

The $383 billion would cover the budget for the Dept. of Energy about 15 times over, Farrell notes.

And how many government agency budgets could you pay for with $383 billion?

The $383 billion would pay for all on-budget costs for the following 18 government agencies (FY 2008), with about $12 billion in change left over, Farrell says. The total $383 billion would cover the combined budgets for Commerce, EPA, Homeland Security, Housing and Urban Development, and the budgets for the entire Judiciary and Legislative branches:

And $383 billion would cover all federal government expenditures on the following areas (with about $13 billion left over):

Sources: Office of Management & Budget, Mid-Session Review, Historical Tables, Budget of the U.S. Government, Fiscal Year 2010

So with these figures in mind, and knowing the US government won't balance the budget for the next ten years--ask yourself this: What foreign government would even want to buy our debt?