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US debt: Federal interest payments could soon exceed military spending
- landoftheice 4y agoThe more interesting issue here that is not mentioned is that when you include the most conservative estimates on unfunded liabilities (medicare into the future, future medicaid, future social security, other legislated obligations into the future) with this current budget mentioned in the article, you arrive at totals that put the debt load above the total federal tax receipts inncomung. Luke Gromen has done the math on this and like many things with the USA govt you won't find this specific number but based on other specific govt given numbers you can do the math yourself but basically we've past the point where you need to take out debt to pay previous debts on the federal level.
- kjfarm 4y agoa nice graphic of current US govt spending. https://www.usaspending.gov/explorer/budget_function https://www.usaspending.gov/explorer/budget_function
- thomastjeffery 4y agoNot very nice on mobile. I had to turn to landscape to even read the labels, which compressed to entire page to half of my screen.
- keneda7 4y agoVery cool site. Thank you very much. I have always used usafacts.org to view spending but after I quick glance I think the site you linked is much easier to view and understand. Crazy how everyone always talks about of defense spending yet its not nearly the 50% I've been told.
- LatteLazy 4y agoThis is a weird one. On one hand the US massively over spends on "military spending", partly because it over spends and partly because a whole bunch of weird (corp) welfare and jobs programs (and things like research too) are incorrectly classed as military spending. But also the US has way way too high a debt level for no actual reason (just under taxing special groups, no real wartime costs, no amazing jump forwards on infrastructure or social capital etc). What's not to hate?
- ISL 4y agoFunctionally, the US has such a huge debt level because borrowing costs were so low for more than a decade. Rising debt payments are the signal that will, on decadal scales, force the US to pare back borrowing and raise taxes. (Raising taxes will probably also slow the economy, encouraging the Fed to lower interest rates, and the cycles cycle anew...)
- LatteLazy 4y agoI think for other countries that would be very and rapidly true. I wonder how it will be for the US. It's one force for sure, but I think the US (with it's economic size and "credit history" and high demand for USD) will be able to ignore it for quite a while...
- bombcar 4y agoArguably the US sells so much debt because there's a hot market for it; the question is will it be a slow cooldown as that market begins to go away, or will it be a sudden shock with all the associated fun? You could argue that the massively inflated military budget is why we can sell so much debt, but any simplistic version of the story is likely to be wrong in key details.
- smileysteve 4y agoThe US was in multiple fronts from 2001-2022, and estimates are that direct costs from 1 of those fronts (Afghanistan) is 8% of the total debt. Almost ⅓ of the total US debt is the result of Covid Spending and Tax cuts in the last 5 years. (Social capital)
- elil17 4y agoWe are currently fighting five wars: https://en.wikipedia.org/wiki/Insurgency_in_the_Maghreb_(2002%E2%80%93present) https://en.wikipedia.org/wiki/Insurgency_in_the_Maghreb_(200... https://en.wikipedia.org/wiki/Operation_Enduring_Freedom_%E2%80%93_Horn_of_Africa https://en.wikipedia.org/wiki/Operation_Enduring_Freedom_%E2... https://en.wikipedia.org/wiki/American_military_intervention_in_Somalia_(2007%E2%80%93present) https://en.wikipedia.org/wiki/American_military_intervention... https://en.wikipedia.org/wiki/American-led_intervention_in_the_Syrian_civil_war https://en.wikipedia.org/wiki/American-led_intervention_in_t... https://en.wikipedia.org/wiki/Yemeni_Civil_War_(2014%E2%80%93present) https://en.wikipedia.org/wiki/Yemeni_Civil_War_(2014%E2%80%9... We were fighting two more prior to the Biden presidency: https://en.wikipedia.org/wiki/American-led_intervention_in_Iraq_(2014%E2%80%932021) https://en.wikipedia.org/wiki/American-led_intervention_in_I... https://en.wikipedia.org/wiki/War_in_Afghanistan_(2001%E2%80%932021) https://en.wikipedia.org/wiki/War_in_Afghanistan_(2001%E2%80... We're also paying for the war in Ukraine and we're still paying the costs of previous wars in the form of mass illness (both physical and mental) experienced by our veterans.
- clashmoore 4y agoTo add a sarcastic comment, the US could just increase its military spending to outspend the interest payment then to solve the issue.
- BitwiseFool 4y agoI had no idea members of Congress browse and post here on HN!
- thrown_22 4y ago
- Victerius 4y agoThis but unironically. The 355 ship navy and 386 squadron air force won't build themselves. All those HIMARS, NASAMS, Stingers, Javelins, and counter battery radars we sent to Ukraine also need to be replenished.
- walljm 4y agoThe vast majority of our defense spending is Salaries for US Service Men and Women. And they are under paid in many cases. Just bumping the salary of the bottom ranks would likely shift the spending ratio. (you can verify this by digging into the monthly treasury statements: https://fiscaldata.treasury.gov/datasets/monthly-treasury-statement/summary-of-receipts-outlays-and-the-deficit-surplus-of-the-u-s-government https://fiscaldata.treasury.gov/datasets/monthly-treasury-st...)
- anotherman554 4y agoCan you elaborate? What you wrote seems to contradict this source: "Roughly one-quarter of the Department of Defense’s budget is for military personnel." https://www.cbo.gov/topics/defense-and-national-security/military-personnel https://www.cbo.gov/topics/defense-and-national-security/mil...
- fosk 4y agoThat payments are increasing is not good, but the US owns its debt in dollars, which gives a lot of flexibility in the long term to do all sorts of shenanigans since the US controls the dollar supply.
- xtian 4y agoSuch shenanigans will continue to make the dollar less appealing as a reserve currency.
- JumpCrisscross 4y ago> shenanigans will continue to make the dollar less appealing as a reserve currency Good. It distorts our trade and provides marginal benefit on the borrowing front, given a non-reserve dollar would be similarly demanded on account of our massive consumer market.
- xtian 4y agoI support it ending too, it will just mean the beginning of much harder times for Americans. Our 'massive consumer market' is propped up by these shenanigans since our manufacturing base has been eroded.
- neilwilson 4y agoWhich would mean more spending and less saving - increasing transaction flow and leading to higher dollar profits and higher taxation in the US. People holding dollars in reserve is what is causing the deficit.
- strawhatguy 4y agoHow is doing more shenanigans good here? Good would be cutting back on spending in real terms. Neither party’s interested in that though
- Victerius 4y agoRaise federal income taxes rates and create additional tax brackets. Or, better, replace discrete tax brackets by a monotonously continuously increasing function t=f(x), where x=taxable income and t=effective tax rate. The function could have certain properties such as t>0 for all x>standard deduction, t=0 for x<standard deduction, lim t (x->infinity) = 0.5 or something like that, and df/dx > 0 for all x > standard deduction.
- NovemberWhiskey 4y agoMy always-unpopular opinion on this is that way, way too few Americans actually pay any Federal income tax.
- newaccount2021 4y ago
- ceejayoz 4y ago60% of households will pay some Federal income tax this year. https://www.cnbc.com/2022/10/28/more-than-40percent-of-us-households-will-owe-no-federal-income-tax-for-2022.html https://www.cnbc.com/2022/10/28/more-than-40percent-of-us-ho... The ones that don't - almost entirely low-income households - spend essentially every penny they earn. Taxing them winds up being more of an economic drag than anything else, and increases need for government assistance. Taxing them is fiscally irresponsible.
- NovemberWhiskey 4y ago30% of households in the $50-75K income range will pay no federal tax. Are you defining those as "low-income households"?
- ceejayoz 4y agoYes, a household making $50k in some areas of the country with a couple of children will absolutely be in the low-income realm that spends every penny that comes in.
- newaccount2021 4y ago
- uri4 4y agoLook at Japan, to see what is future for US.
- aliqot 4y agoI'll just be over here walking in this forest.
- enchiridion 4y agoDon’t do that.
- uri4 4y agoThat is your choice, but sunrise and sunset is always nice)
- algoatecorn 4y agoIn regard to what?
- refurb 4y agoUnlike Japan, the US has a health immigration flow coming in. It's not the same at all.
- kennend3 4y agoThe problem with your line of thinking is three fold. 1) remittances. While the US does import a lot of people, the economic benefit to the nation is greatly reduced by remittances. 2) Immigration is an ebb and flow type thing, during good times people run to the US but during bad times? There have been several years where the H1B quota was far from reached. 3) Depending on immigration for your long term future is risky. Other nations compete for them, and as the situation at home improves this reduces the advantage. My country (Canada) is hooked on "immigration is our future" as well.. But there is negative news about this approach recently. India newspapers have been running stories about how Canada only wants "low cost labour"... If this continues, will Canada be able to attract people?
- pcdoodle 4y agoHey guy, why don't you spend a bunch of money, you know for saftey and stuff and then we're going to raise the interest we charge you, sound good fella?
- arberx 4y agoUp to congress to balance budgets. Markets will force their hand if they have to (see England).
- theandrewbailey 4y agoMaybe a balanced budget amendment would set things on a sustainable path, but no neo-conservative, neo-liberal, or MAGA supporter would let it pass. If the fall of the Roman Republic is anything to go by, we're at the point where senators are raiding the treasury.
- neilwilson 4y ago"Maybe a balanced budget amendment would set things on a sustainable path" If for sustainable you mean a complete collapse of the economy as excess savings and excessive taxation drain the flow of money.
- ausbah 4y agobalanced budget amendments cripple a government's ability to respond to economic crisis
- theandrewbailey 4y agoIf Keynesian economics are anything to go by, looking at US budget deficits, there's been a non-stop economic crisis for the past 20 years. https://www.statista.com/statistics/200410/surplus-or-deficit-of-the-us-governments-budget-since-2000/ https://www.statista.com/statistics/200410/surplus-or-defici...
- neilwilson 4y ago"Markets will force their hand if they have to (see England)." That didn't happen in England (The UK actually - England is California in the United Kingdom). Markets are servants not master. And you cannot 'balance budgets' if you allow savings in the denomination. The accounting won't allow it. For somebody to save somebody else has to borrow. That's why you end up 'in credit' at the bank. The bank is borrowing from you. Presumably you don't want your bank to balance its budget and confiscate your 'in credit' balances.
- johncessna 4y agoIf you tell a lie enough times, it becomes the truth. Wake me up when federal interest payments exceed the amount the feds spend on social programs, which far far exceeds the defense budget. [1][2] [1] https://usgovernmentspending.com/united_states_fed_spending_pie_chart https://usgovernmentspending.com/united_states_fed_spending_... [2] https://www.nationalpriorities.org/budget-basics/federal-budget-101/spending/ https://www.nationalpriorities.org/budget-basics/federal-bud...
- boole1854 4y ago> If you tell a lie enough times, it becomes the truth. What's the lie supposed to be here?
- johncessna 4y agoIt's typical journalistic manipulation. It's a garbage article meant to do two things. Scare people and tug on the belief, which is confirmed in these comments, that the US spends the most money on the military.
- boole1854 4y ago> Scare people and tug on the belief, which is confirmed in these comments, that the US spends the most money on the military. I just don't see where the article stated or implied that military spending is the largest spending category. It noted that interest spending has surpassed VA and transportation spending, is around the same as education spending, and may soon surpass military spending. That doesn't mean military spending is the largest category any more than it means VA spending is the smallest category.
- thomastjeffery 4y agoI wouldn't classify ~4/5 of the total as "far far exceeds". That's 80 to 20.
- greenhearth 4y agoFrom your source: "By far, the biggest category of discretionary spending is spending on the Pentagon and military. In most years, this accounts for more than half of the discretionary budget."
- calebm 4y ago"No generation can contract debts greater than may be paid during the course of it’s own existence." (Thomas Jefferson, https://jeffersonpapers.princeton.edu/selected-documents/thomas-jefferson-james-madison https://jeffersonpapers.princeton.edu/selected-documents/tho...)
- Ergo19 4y agoOur current debt:GDP ratio is ~ 125% these days, so I don't think there's any danger of being unable to pay during this generation.
- georgeecollins 4y agoIf this were a really pressing problem, the dollar wouldn't be such a strong currency. It is a problem, but we had balanced budgets in the '90s and there are many ways we could do that again: - Start bringing back some of the taxes we had in the 1950s, when the country actually grew faster. - Make people pay sst up to a higher level of income and / or means test the benefit. - Don't spend like $3T in forever wars like Iraq and Afghanistan. - Let Japan and Germany pick up more of the defense bill. As an American, I actually don't like this idea much. How about: Let an inevitable recession in China and emboldened NATO be the cause of military reform to save costs.
- seibelj 4y agoAll sides of the political spectrum do this but it’s hilarious to me the “The 1950’s were amazing and we had high income taxes!” and ignore all the other things - like the entire world was bombed to shit and the seeds of stagflation were planted then.
- ejstronge 4y agoHow do you link the 1950s to stagflation? Are there any articles on this idea that you recommend?
- strawhatguy 4y agoNot op, I’d have to look. Generally though the seeds of a downturn don’t happen then, they happen during the boom times, when everything seems great. It’s the biggest issue I have with Keynesian school of thought: the answer to get out of a downturn is to gov spend more, but it ignores what happens in the boom times (in which gov also spends more these days). Meanwhile growth, even in good times, has been slowing. Used to be 3-4%/year 30 years ago, more like 1-2% now. And still the calls are for spending more. I don’t know when exactly we’ll stop growing altogether, could be 100 years from now, but with all the gov spending, we sure want to find out!
- dwater 4y agoWell, the entire rest of the industrialized world was bombed to shit and the US was not only untouched but also had been ramping up production as much as possible for 5 years. It's pretty much an ideal situation for a large economy when all of your competitors have destroyed each other and now everyone has to look to buy their rebuilding supplies from you.
- mattmaroon 4y agoThat’s good right? If people want to lend us money at sub-inflationary rates to finance our own growth and prosperity, that seems better than shoveling it to defense contractors who are mostly building weapons to fight the types of wars that we don’t have anymore. And the conventional wars we’re well prepared for I’m mostly fine without. I’m not one of those nutters who thinks we should castrate the military, but it’s insane to think the level of spending we have is not way higher than needed.
- scifibestfi 4y agoThe worst part is, what did we get for that $31 Trillion in debt and other spending? Are we any better off? Did we convert to a clean grid? Connect every city by rail? Fix every road and bridge? Fix healthcare and education? Reduce crime to a minimum? Reduce homelessness to a minimum? Did anything improve materially? Did we... do anything constructive and meaningful with that $31 Trillion?
- taylodl 4y agoThe $31 trillion is the debt - the difference between federal income and federal outlays. The actual federal outlay was significantly higher. I know your last question is rhetorical but consider the work of NASA. Would you call the Mars rovers constructive and meaningful? What about the James Webb telescope? We also spend a lot of money stabilizing the agricultural market to maintain a steady food supply. Is that constructive and meaningful? What about all the medical research we fund? Is that worth it? After all that research has led to the discovery of cures for various cancers and has saved lives. It should also be duly noted that Joe Biden and the Democrat-led Congress has been able to do something that hasn't been done in over 40 years - they got an infrastructure bill passed and it was quite comprehensive. All your questions, even if rhetorical, point to why elections matter.
- kaashif 4y agoAren't the largest parts of the federal budget Medicare/Medicaid and Social Security? I think that's money well spent.
- megaman821 4y agoIs it? It feels like something is broken. The government spends nearly a trillion dollars a year on health related expenses. They should be investing aggressively so that a trillion dollars in health related expense aren't needed forever. It seems totally unsustainable. The US is going to need cheaper, more effective health care to keep Medicare/Medicaid/VA Hospital programs solvent.
- strawhatguy 4y agoNope! The national (and state) regulatory bodies also tend to get in the way of such improvements as well: they make those efforts more unlikely, even as more and more money’s spent.
- strawhatguy 4y agoLots of areas to cut spending, but naturally not even considered, even in comments here. Also this is just us national debt right? There’s still each state’s own debt, and cities therein
- cs702 4y agoKeep in mind, things are not as simple as some talking heads would have you believe: * More than a fifth of the treasury bond debt owed by the federal government is owed to... none other than the Federal Reserve, which is financially part of the federal government. Every year, more than a fifth of the debt interest payments made by the US Treasury go to the US Federal Reserve, which dutifully sends them all back to the US Treasury every year.[a] * If you own any US treasury bonds (whether directly, in a 401(k), in some other kind of retirement or pension plan, or in an index fund), that's your share of the US national debt: It's the amount the federal government owes you. * A dollar is an obligation of the US government, backed by its full faith and credit, just like a treasury bond, but unlike the bond, a dollar pays no interest. When the Fed buys and sells treasury bonds in the open market, it exchanges non-interest-bearing US obligations with interest-bearing ones. Our financial system is more complex than most people grasp, due to a general lack of education in and understanding of macroeconomics. Be very wary of simple, seemingly obvious, morally appealing narratives. Usually, they're not even wrong. [a] https://www.wsj.com/articles/higher-interest-rates-fuel-losses-at-the-federal-reserve-11667208602 https://www.wsj.com/articles/higher-interest-rates-fuel-loss...
- coffeeblack 4y agoAnd who gets all those interest payments?
- ryndbfsrw 4y agoThese sorts of articles dont reflect how the US gov funds itself: 1. Gov spends $100 and taxes $90 2. Commercial banks then have $10 (100-90) in reserves at the Fed 3. Treasury is required to sell $10 of bonds to keep its account at the Fed at zero balance. (This collective tally of 'debt' is what everyone loses their minds over) 4. Commercial banks buy these bonds up immediately as long as the interest earned on the bond is greater than the interest earned on the reserves at the Fed. Important things to remember: - The $10 'borrowing' done by the government is funded by the deficit it created. - The treasury doesn't have to issue bonds to fund itself it can simply deficit spend as its done in every major war or during Covid. - When the treasury does choose to issue bonds the coupons dont need to match market interest rates (this is what the Bank of Japan is doing this very minute). The bonds will always be purchased so long as there is a positive interest rate differential between the bond and the Fed's reserve interest rate. - Bonds have secondary uses but funding the government is not one of them. - Government debt = private sector savings. Collectively it represents the excess of money paid into the pvt sector vs whats been taken out via taxation. - US gov bonds are extremely useful financial instruments used in all sorts of repo operations providing liquidity in the banking sector. They are better than gold! - Dont stress about government debt. It has never, and will never, be repaid and thats a good thing because it effectively translates to a massive destruction of pvt sector savings.
- recursivedoubts 4y agooh, no worries... as I've been told many times: we owe it to ourselves...