Here are some more disturbing numbers to ponder in the wake of last year’s tax reform.
Through May of this year, the US Treasury paid $233 billion in interest on its debt. The government’s fiscal year ends in September, so that figure will be much larger when June, July, August and September are added in.
This year’s figure compares with $198 billion in debt payments last fiscal year through May, $176 billion in payments the prior year and $159 billion through May of fiscal 2015.
So, the amount that the US government has to pay to people who lent it money has been rising steadily. This expense is third only to defense spending and Social Security/Medicare.
And the figure I just quoted is calculated with interest rates that are still very low. The Fed is expected to raise rates again next month, and there’s a good chance of another rate hike in December.
Each quarter-percentage-point hike in rates costs Uncle Sam billions of dollars. And all of this comes at a time when the Trump administration’s tax reform will cause less revenue to be collected and more debt issuances to be needed.
According to the Congressional Budget Office, Washington will be paying $818 billion a year in interest by 2027. And these interest payments will be the largest expenditure of the US government by 2050.
But long before then, this expense will be “crowding out” — as economists call it — other spending needs.
To put this into perspective, it would cost a reported $175 billion a year to bring every American above the poverty level. And to express the issue in militaristic terms, that $233 billion Washington paid out in debt service through May of this fiscal year could pay for just about 18 aircraft carriers.