Current US Debt
While US federal government’s debt has reached historic levels, there’s no reason to panic. The US government’s revenues in 2019 totaled $3.5 trillion, or 16.3% of the GDP. As long as the economy is growing at an acceptable rate, the US national debt will remain serviceable. As long as US debt continues to grow at an acceptable rate, many economists don’t consider the rising debt a concern. In fact, the US government has never formally defaulted on its federal debt, although the country technically defaulted on federal debt in 1979.
Interest payments on public debt spiked by $54 billion in FY2021 compared to FY2021
The federal government is set to spend approximately $300 billion in FY2021 on net interest payments on our national debt, which is more than nine percent of all federal revenue collection, or over $2,400 per household. This amount is greater than the total expenditures of most households on major expenses, such as education, meat, eggs, and dairy. Additionally, interest payments make up almost half of worker-side payroll taxes, and are nearly double the amount of payments made by the federal government through federal excise taxes.
While this number appears alarming, it is not surprising given the ongoing financial crisis. According to the U.S. Government Accountability Office, interest payments on current US debt rose by $54 billion during FY2021 compared to FY2020. The government is expected to exhaust its borrowing capacity by October 17th, although strong revenue collections and special dividends from mortgage giants pushed back this date.
Unfunded obligations took federal government’s total obligations to $62 trillion in the first quarter of 2020
The U.S. government has accumulated nearly $162 trillion in unfunded obligations. These include federal entitlement programs such as Social Security. These obligations are not included in the official national debt, but the government does have some money set aside to cover them. The federal government’s total obligation is expected to reach $62 trillion in the first quarter of 2020, putting the government in a very precarious position.
The federal government’s non-interest spending makes up two-thirds of the total. These funds go to mandatory programs like Medicare and Social Security. They are based on eligibility standards. They also cover other mandatory programs such as interest on the national debt, which is paid to holders of Treasury securities. Congress can change the laws that authorize these programs to change. For example, the federal government’s budget is currently $1.2 trillion short of its debt ceiling.
Intragovernmental debt totals $6.5 trillion
The amount of money held by the government is staggering. Intragovernmental debt is $6.5 trillion compared to $4.8 trillion a decade ago. Government agencies like the Social Security Trust Fund hold over 46% of the intragovernmental debt. The total amount of public debt is also staggering, with $23.5 trillion held by individual investors, the Federal Reserve, and large investment funds. Foreign governments only hold a small percentage of the total, with China, Japan, and the UK holding almost $622 billion.
Those who follow the federal government’s finances have noticed the staggering growth in interest costs. Between 2022 and 2031, interest costs are expected to reach $5.4 trillion. This amount will make up 12% of the federal budget, or nearly half of all revenue. This fact should raise eyebrows among lawmakers. Many have argued that debt is limiting their willingness to spend, and Sen. Joe Manchin of West Virginia has expressed his disapproval of Democrats’ $2 trillion Build Back Better plan.
Intragovernmental debt projected to fall to $5.1 trillion by end of FY 2031
Today, the total amount of intragovernmental debt is around $6.5 trillion, down from nearly half a decade ago. Moreover, by the end of FY 2031, the amount of debt held by the government is projected to fall to $5.1 trillion. Because of this, major trust funds will be forced to sell off some of their debt to meet their expenses. That means that the U.S. government will be forced to spend more than it brings in.
In the past, the U.S. government’s debt was projected to reach $29 trillion by 2020, but now the amount held by the public is at $22 trillion. By 2051, it is expected to double to $48 trillion. That is nearly twice as much as it was at the beginning of the last century. But if Congress does not act now, it could end up in a worse situation than now.