The U.S.’ debt is skyrocketing – and soon the country will spend more on servicing its debt than it will on national defense – and a little further out it will spend more on debt than on all nondefense discretionary programs combined.
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While America’s debt has skyrocketed, low inflation and international demand for Treasury bonds has held down interest costs, but with the Federal Reserve hiking interest rates, this is expected to change.
As reported by The Wall Street Journal citing data from the Congressional Budget Office (CBO), the U.S. will spend more on interest than it spends on Medicaid in 2020, in 2023 interest spending will exceed national defense spending, and by 2025 it will spend more on interest than on all nondefense discretionary programs combined.
The CBO estimates that interest spending will rise to $915 billion by 2028, equivalent to 3.1 percent of gross domestic product, and well above the interest costs of $263 billion, or 1.4 percent of gross domestic product in 2017, as calculated by the Wall Street Journal.
While debt has been increasing, low inflation and a strong demand for U.S. Treasury bonds have held down interest costs. But now, the Fed is hiking interest rates as inflation has percolated higher. Higher interest rates will translate into higher debt payments.
But, it isn’t just higher rates that are a concern – it is the total amount of debt. The country’s total debt is currently around $21 trillion, including $15.8 trillion in public debt. According to Statista, by 2028 total debt will swell to $33.8 trillion.