The US debt mountain is growing so fast the government could soon be spending more on interest payments than on defense

[Ubiquitous]

The US's mountain of debt is growing every day – and the government could
soon be spending more on interest payments than on defense, according to
Capital Group.

"US debt dynamics are evolving in a way that requires attention," Darrell
Spence, an economist for the US asset manager, said in a research note back
in October. "Over the next five years, net interest payments on the debt are
expected to surpass defense spending."

Spence added that if the world's largest economy's debt pile rises at the
rate expected by the Congressional Budget Office, the government's spending
on net interest payments could rise from under $500 billion to a staggering
$1.4 trillion by 2033.

The idea that interest payments could soon surpass defense spending could be
a source of concern for policymakers, with President Joe Biden pledging
Monday to ask Congress for over $100 billion worth of funding to support both
Israel and Ukraine.

Debt has emerged as a major concern for Wall Street this year, with lawmakers
reaching an 11th-hour deal to raise the government borrowing limit back in
May and Treasury bonds suffering a rout that ranks amongst the worst sell-
offs in market history.

The US government's liabilities breached an eye-watering $33 trillion on
September 18 — a month later, the figure had jumped $33.64 trillion, implying
an average daily increase of $20 billion.

America's borrowings be approaching levels that could cause economic
distress, according to Spence.

Typically, a country's debt levels become a problem if it "had interest rates
that were higher than its economic growth rate, the incremental revenue
generated by the economy each year became smaller than the interest payments
on the debt, and the debt began to grow all by itself," he wrote.

"The US had been far from reaching that threshold. Until now," he added.

Spence warned that the ballooning debt pile could force the government to
raise taxes, fuel further bond sell-offs, and force the Federal Reserve to
lock in higher interest rates.

"Slower economic growth also could be expected, given that government
spending would need to be re-routed to debt service," he added. "For
investors, this could lead to lower stock market returns over time, given the
strong long-term correlation between GDP growth and market returns."

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Let's go Brandon!

[Mitchell Holman]

Ubiquitous <web...@polaris.net> wrote in
news:20240111-1...@news.giganews.com:

Year - Debt, in billions

2016...........$19,573

2017...........$20,245

2018...........$21,516

2019...........$22,719

2020...........$27,748

2021...........$29,617

2022...........$30,824

http://tinyurl.com/3xy2wkmh