US Debt Interest Payments Soar To $1 Trillion Per Year

Payments have doubled over the last 19 months as interest rates soared.

Interest payments are now the second-largest category of federal spending.

Analysis by Bloomberg shows that the US's payments on government debt interest now exceed $1 trillion per year on an annualized basis: More than any other category of federal spending, except for Social Security.

The US Debt Addiction

The cost of servicing the US debt has doubled over the past 19 months as the government deficit has remained high, adding trillions to the total debt. High interest rates have also made borrowing significantly more expensive. In 2022, the government spent $476 billion on interest payments, and $352 billion in 2021.

Over the past 100 years, the US federal debt has increased from $405 billion in 1923 to over $33 trillion in 2023. This is equivalent to a 4.5% increase in debt every year.

US national debt over the last 100 years
US debt over the last 100 years. Source: US Treasury Department

Adjusted for inflation, debt has still dramatically increased over the past 20 years, from 55% of GDP in 2001 to 123% today.

Interest Rates Pile On The Pressure

While $33 trillion is an enormous figure, it's the interest on that debt that is the real problem, since that has to be paid out of federal income. Interest payments have ballooned in recent months, as the total debt climbs but also, critically, as interest rates have rocketed from their all-time lows just above 0% to their present levels of almost 5.5%.

Source: St Louis Federal Reserve

With annualized interest payments now reaching the $1 trillion level, a sizable percentage of the US national spend is consumed simply in servicing its debt. As Bloomberg notes, "That amount... is equivalent to 15.9% of the entire Federal budget for fiscal year 2022."

Social Security accounts for 21% of federal spending, or just over $1.4 trillion for this year.

An Ever-Rising Figure

Critics have noted that, as the US adds more debt to the pile, and interest payments on existing debt are rolled over at the higher rate, this number will rise further—likely hitting $1.5 trillion in three years. That has prompted some warnings about the state of the country's finances and the sustainability of the current approach.

It has also made slowing the accumulation of debt, or even reversing it, an election issue. Donald Trump, for example, has committed to paying off the $35 trillion in debt. "We're going to get it done fast, too."

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