A year of interest payments on the U.S.’ $31 trillion of debt could soon cost as much as a second military on the national budget.
The Congressional Budget Office has estimated that by 2029, net interest payments on the debt will be worth more than the entire U.S. defense budget, CNN reported.
“That made everyone a little bit nervous,” Dan White, an economist with the research firm Moody’s Analytics, told CNN.
In the fiscal year that ended Sept. 30, the government paid $475 billion in net interest payments, which already exceeds what was spent on veterans’ benefits and transportation combined, according to CNN.
The Defense Department’s budget was $722 billion in the 2022 fiscal year, and President Biden’s 2023 budget request is $773 billion.
Moody’s Analytics is even less optimistic than the CBO, estimating that federal interest payments will top the defense budget by 2025 or 2026, CNN reported.
The interest payments have been surging amid the Federal Reserve’s recent moves to curb inflation, including by raising interest rates. In the fiscal year that ended Sept. 30, the government paid nearly 35% more than the prior year in net interest payments, according to CNN.
The national debt grew to a record $31 trillion last month, CNN reported. Nearly $8 trillion has been added since 2020 as the government borrowed heavily at near-zero interest rates amid the COVID-19 pandemic.
White said that borrowing under former President Donald Trump and President Joe Biden “fast-forwarded us almost an entire generation” in debt levels.
CNN reported that while the U.S. will likely always be able to make the payments, the interest on those payments could eat into other spending priorities.
“Regardless of who wins the midterms or in 2024, there are really difficult decisions that will have to be made,” White said. “This is really going to handcuff them.”