Mounting pile of debt worries experts

How much is the United States spending on interest payments to finance its national debt?

Enough that the outlays this year will exceed the defense budget, which is the largest in the world, the nonpartisan Congressional Budget Office said.

The federal government will spend $870 billion on interest payments this year — and $850 billion on defense, according to The Budget and Economic Outlook: 2024 to 2034, published by the office.

"Interest is projected this year to be the second-largest federal program — it means your tax dollars are going to interest instead of going to everything else," said Marc Goldwein, senior policy director at the bipartisan think tank Committee for a Responsible Federal Budget, CBS News reported. "As far as I know, interest has never been larger than the defense budget."

Debt held by the public is projected to rise each year relative to the size of the economy, reaching 116 percent of GDP in 2034, more than at any time in US history.

The CBO estimated that without changes to existing laws, the debt-to-GDP ratio will reach 129 percent by 2033, and 192 percent by 2053.

Interest payments will rise rapidly throughout the next decade — from $951 billion in 2025 to $1.6 trillion in 2034. Net interest payments will total $12.4 trillion over the next decade, it forecast.

The previous high for interest payments relative to GDP in the post-World War II era was 3.2 percent in 1991; that ratio is on course to be exceeded next year.

For the first time, the US national debt this year has exceeded $34 trillion.

In an investor letter posted last week, hedge fund billionaire Ken Griffin criticized the US government over the mounting debt, warning that future generations will face dire consequences.

'Growing concern'

"The surging US public debt is a growing concern that cannot be overlooked," Griffin, founder and CEO of Citadel, wrote in his 2023 year-end investor letter.

"It is irresponsible for the US government to incur a deficit of 6.4 percent when unemployment is hovering around 3.75 percent. We must stop borrowing at the expense of future generations."

An analysis published on Tuesday by Bloomberg ran a million simulations on the US debt outlook and found that 88 percent of them showed borrowing is on an "unsustainable path".

Last year, The Conference Board, a nonprofit business membership and research group organization in New York, surveyed 1,247 C-suite executives across the globe, including 630 CEOs, to identify the most critical issues they face.

"US CEOs say the geopolitical risk that concerns them the most regarding business operations is homegrown — the burgeoning US national debt and deficits," said Lori Esposito Murray, president of the Committee for Economic Development, the public policy center of the board.

"The cost of servicing the debt is rapidly rising due to inflation and rising interest rates, consuming as much of the federal budget as defense spending and crowding out national priorities," Esposito Murray said.

The issuance of US Treasury securities to finance deficits and debt puts a heavy strain on the financial system, potentially raising business borrowing costs, limiting access to capital and lowering living standards, she said.

"The congressional debate this year over fiscal year 2024 spending levels has contributed to a historic collapse of governance in the US Congress, a broken budget process, the brink of a national default, a looming government shutdown and the potential downgrading of the US credit rating. US global leadership and national security are at risk," she said.

"The debt crisis is here — not down the road. As a nation, we must act now."

hengweili@chinadailyusa.com