Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

Interest Payments on Federal Debt on Pace to Eclipse Social Security Outlays

  by    0   0

At the current trajectory, the cost of paying the annual interest on the US debt will equal the annual cost of Social Security within 30 years, according to a recent report released by the Congressional Budget Office.

By 2048, as interest rates rise from their currently low levels and as debt accumulates, the federal government’s net interest costs are projected to more than double as a percentage of GDP and to reach record levels.  Those costs would equal spending for Social Security, currently the largest federal program, by 2048.”

According to the CBO, federal debt will double in the next 30 years to a record 148% of GDP. And the agency currently uses a low estimate for its debt-to-GDP ratio. It calculates the US debt is currently about 78% of GDP. Many mainstream economists say that number ranges closer to 105% GDP.

We have previously warned that the rising debt coupled with a higher interest rate environment could crush the federal budget under interest payments. Last fall, Pres. Trump signed a budget bill adding about $318 billion to the federal debt. That increase alone will require an extra $7 billion interest payment annually. Analysts have calculated that if the interest rate on Treasury debt stood at 6.2% – their level in 2000 – the annual interest payment on the current debt would nearly triple to $1.3 trillion annually.

Now, the government itself admits it’s on an unsustainable trajectory. And the CBO generally uses relatively conservative assumptions to generate its forecasts. The reality could turn out much worse.

So what, you might ask?

In the first place, growing debt coupled with soaring interest payments creates a vicious upwardly spiraling cycle. As debt grows, it costs more money to service. That requires more borrowing, adding to the pile of debt.

In the second place, debt stifles economic growth. Multiple studies have shown GDP growth decreases by an average of about 30% when government debt exceeds 90% of an economy.

Peter Schiff has said the massive debt could also spur on the dollar collapse.

But Congress seems unwilling or incapable of doing anything about the debt. D.C. has a spending habit it just can’t break. The GOP-controlled Congress recently had an opportunity to slash a modest $15 billion in federal spending authority.

It didn’t.

To put that in perspective, that’s just 0.08 percent of the federal budget.

As Eric Boehm explained in an article published at Reason.com, the “rescission” package would have only cut just $1.1 billion in actual federal spending over 10 years. The rest of the “cuts” came through sweeping up unused budgetary authority from various departments and agencies in the current budget.

If Congress can’t even cut a small fraction out of the budget when the party that is supposedly “fiscal responsibility” is in power, when exactly will it address the debt problem?

It probably won’t.

Get Peter Schiff’s most important Gold headlines once per week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!


Related Posts

JP Morgan Chase CEO Worried About Higher Than Expected Inflation

With CPI data once again coming in hotter than expected, it’s getting harder and harder for the mainstream to swallow the “transitory inflation” narrative. And some people are starting to worry. During an earnings call, JPMorgan Chase CEO Jamie Dimon expressed concerns about higher than expected and persistent inflation ahead.

READ MORE →

American Consumers Continue to Run up Credit Card Debt

Consumer borrowing has slowed somewhat from the record level we saw in June, but Americans continue to pile on the debt. Consumer debt grew by $14.4 billion in August to $4.35 trillion, according to the latest data from the Federal Reserve. That represents a 4% increase. This follows on the heels of a 4.8% increase in […]

READ MORE →

Demand for Silver in Electronics Sector Projected to Surge

The demand for silver is expected to expand along with the continued growth in global connectivity. According to a report released by the Silver Institute, silver demand in electronics and electrical applications is projected to rise by 10% by 2025.

READ MORE →

Inflation Bites! Rising Prices Are Eating Up Personal Income Gains

Inflation bites! Personal income rose again in August, but once again rising prices ate up all the gains and then some.

READ MORE →

Central Banks Added Nearly 30 Tons of Gold to Holdings in August

Central banks continue to add gold to their reserves.  Global central bank reserves increased by a net 28.4 tons in August, according to data compiled by the World Gold Council. Gross central bank gold purchases came in at 30 tons.

READ MORE →

Comments are closed.

Call Now