CBS News: The Skyrocketing Interest Payments on U.S. Debt

Article by Rachel Layne on CBS News

Last week, the Congressional Budget Office released figures for the U.S. fiscal year ending Sept. 30, and a few things leaped out to budget watchers.

For all of fiscal 2018, net interest on the public debt rose by $62 billion to about $371 billion, according to the CBO's preliminary numbers. That's a 20 percent jump.

As a percentage of GDP, interest payments are likely to be the highest since the Great Recession, The Washington Post reported.

"Interest costs are the fastest-growing part of the federal budget," Michael Peterson, head of the nonprofit Peterson Foundation, told the Post. "Over the next decade, interest costs will total nearly $7 trillion, rising to become the third-largest 'program' in the federal budget."

The growth rate for interest payments is soaring

In fiscal 2018, the government spent $371 billion on net interest, while the Defense Department budget was $599 billion. Social Security benefits cost $977 billion, Medicare $585 billion and Medicaid $389 billion, according to the CBO estimates.

But the CBO said interest outlays' rate of growth in fiscal 2018 was faster than that for the three mandatory federal programs: Social Security (up $43 billion, or 5 percent); Medicaid (up $14 billion, or 4 percent); and Medicare (up $16 billion, or 3 percent). In comparison, net interest on the public debt increased by $62 billion, or 20 percent. 

Deficits don't usually rise in economic boom times

The U.S economy is cranking on all cylinders. That should mean higher tax revenues and smaller deficits, the Washington Post's Heather Long wrote this week. She pointed out that the last time unemployment reached low levels (it's now at 3.7 percent), in 2000 and 1969, the U.S. government ran a surplus.

Last year's tax cuts aren't helping

The deficit for fiscal 2018 was an estimated $782 billion, up from $666 billion in 2017, according to the CBO. Kevin Hassett, chairman of the White House's Council of Economic Advisers, this week said the White House will release plans on how to attack it soon, according to Bloomberg.

Fiscal 2018 spending exploded by nearly 130 percent, but federal tax receipts rose just 0.4 percent. That's partly because of a 31 percent decline in corporate tax payments and other features included in last year's tax cut bill, The Wall Street Journal reported.

Income inequality could also hit the nation's ability to repay its debt, and that threatens America's credit rating, Moody's Investors Service recently warned.

The U.S. Treasury Department is slated to release its latest figures for federal receipts and outlays this month.

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