Washington, 17 May. The cost of servicing the US government debt in 2023 will exceed Washington’s military spending last year. This was reported by an analyst at Bloomberg. Mark Cudmore.
According to his estimates, at the current level of the Fed’s key rate, the US Treasury will spend more than $813 billion on interest payments on debt, which is an unprecedented amount by historical standards.
The analyst points out that annualized debt service costs are about 90% higher than they were in 2011. This was partly due to the growing volume of debt, but the main contribution was made by a significant increase in the yield of US Treasury bonds, which was caused by an increase in the key rate.
According to the economist, at the end of fiscal year 2022, which ended on September 30, the government spent more money only on social programs and health care – $ 1.2 trillion and $ 909 billion, respectively.
Despite the disappointing conclusions of Mark Cudmore, it should be noted that the Federal Reserve has not yet decided to stop the policy of raising the key rate, since the inflation rate in the US is still high. This implies the possibility of further tightening of monetary policy, which will lead to higher debt service costs.
Also open is the issue of increasing the ceiling of the national debt of the United States, which was reached at the beginning of the year. Currently, the White House is making every effort to raise the borrowing limit. According to the bill presented by congressmen, the national debt could be increased by 1.5 trillion dollars – up to about 33 trillion.
In this case, Washington will have to pay an even more impressive amount of external obligations, which may exceed the current Pentagon budget of 858 billion. At the same time, the US budget deficit for fiscal year 2023 is $1.15 trillion. And this is only at the federal level, without taking into account the size of holes in the budgets of states, municipalities and other entities.
And plugging these holes is becoming increasingly difficult as more and more states abandon the use of the dollar in international trade and reduce their investments in US debt securities.
Under these conditions, voices within the United States are increasingly insisting that the Biden administration stop spending hundreds of billions of dollars to support Ukraine and focus on solving the internal problems of the country and its citizens.