This past weekend when no one was looking, the U.S. Treasury revealed how much in interest the government is paying on the ballooning national debt. With higher interest rates, the numbers were eye-popping. It will have the following repercussions going forward for all Americans.
For the first time ever, the interest paid by the federal government is more than the entire defense department budget. The interest on the debt for the last year was $879.3 billion – almost a trillion dollars. The entire defense department budget was $775.9 billion.
The first problem is the government brings in only $4.4 trillion annually which was considered a good year this past year. That means almost 20% of the budget is paying for interest for past borrowing. No benefit comes from that. For personal finances, that would not be considered bad . However, with personal finances, the debt is being paid off. For the U.S. government, that is just interest and no debt is being paid off.
The second problem is the expenditures. The U.S. Treasury is spending about $5.3 trillion and IT CONTINUES TO INCREASE. That means the U.S. Treasury is running about a 41% in deficit spending. The reason the deficit is high is from higher interest rates and escalating spending levels. And President Joe Biden wants to pay off $100 of billions in student loan debt, and leave the underlying problem continues to get worse?
Think about it for a second. If you made $50,000 annually, but were spending $70,500 each year, how long would that last? Not very long. Your money would dry up fairly quick as you head to a bankruptcy court. You would have to cut spending dramatically and probably sell possessions. The cost to borrow money would skyrocket for you as you are a definite risk of default.
It is the same problem here. The U.S. Treasury is not immune to the principles of borrowing and paying interest. We are heading for a government financial disaster unless interest rates come down dramatically and the government cuts back on spending A LOT. Social Security? How does it continue as is when there are huge deficits. It is a good question. Be prepared for a future time when the U.S. Government will be limited in providing resources to us the citizens. This is a self-made disaster made by the leaders in Congress and the President such as Schumer, Pelosi, Biden, McConnell, with Trump, and Obama not far behind in responsibility.
What does it mean for you and I.
It means less government spending and higher taxes in the future to make up the difference if we are going to get out of this. Otherwise, the disaster waiting I am afraid will be much worse than the financial crisis. And I was one of a small group that warned Congress and state politicians of the problems leading up to the Financial crisis during my presentations to them in San Francisco in 2006 and Washington D.C. in 2007. Many thought we were off the rails, and then quicky ran back to us when the problems started to unfold.
This is a serious problem and unless someone takes action real quick, a financial waterfall could be just around the corner.