4 ms·

spending doesn't take into account debt payments though, and those snowball.

by throwawaymaths 2y ago

JumpCrisscross 2y ago
> spending doesn't take into account debt payments Spending is related to debt only inasmuch as it exceeds taxation.
- brightball 2y ago
  I’ve seen several reports recently that the interest on our debt will exceed the defense budget within the next couple of years. Is that not accurate?
  - JumpCrisscross 2y ago
    > several reports recently that the interest on our debt will exceed the defense budget within the next couple of years. Is that not accurate? This happened, I believe, in FY 2024 [1][2]. We're currently running a 6.5% primary deficit/GDP [3]. With real GDP growing around 2.5% a year [4], that means we need to cut about 4% of GDP, or $1.2tn [5], to stabilise our debt/GDP ratio. That's two Medicaids [6]. (Which would probably trigger a recession.) [1] https://comptroller.defense.gov/Portals/45/Documents/defbudget/FY2024/FY24_Green_Book.pdf https://comptroller.defense.gov/Portals/45/Documents/defbudg... $842bn [2] https://budget.house.gov/imo/media/doc/the_baseline_and_interest_costs.pdf https://budget.house.gov/imo/media/doc/the_baseline_and_inte... $870bn [3] https://bipartisanpolicy.org/report/deficit-tracker/ https://bipartisanpolicy.org/report/deficit-tracker/ [4] https://fredblog.stlouisfed.org/2024/06/how-much-did-the-us-economy-grow-last-year/ https://fredblog.stlouisfed.org/2024/06/how-much-did-the-us-... [5] https://fred.stlouisfed.org/series/GDP https://fred.stlouisfed.org/series/GDP [6] https://www.pgpf.org/article/budget-explainer-medicaid/ https://www.pgpf.org/article/budget-explainer-medicaid/
  - phonon 2y ago
    It already was in 2024 (if you exclude veteran related costs.) Some of the increase is due to the government debt being larger, and some from interest rates rising. (The average interest rate we pay on our debt has doubled in the past 4 years, from 1.59% in 2020 to 3.28% in 2024.)
- AnthonyMouse 2y ago
  If you increased debt in the past, interest on the debt then becomes a recurring expense. You then have to reduce spending relative to taxes, not only to pay the interest, but to eventually pay down the principal if you ever want to stop paying the interest.
  - blharr 2y ago
    Eh, not necessarily. Inflation will eventually reduce the effective principal amount over time and you would stop feeling the effect of any interest

spending doesn't take into account debt payments though, and those snowball.

JumpCrisscross 2y ago

> spending doesn't take into account debt payments Spending is related to debt only inasmuch as it exceeds taxation.

brightball 2y ago
I’ve seen several reports recently that the interest on our debt will exceed the defense budget within the next couple of years. Is that not accurate?
- JumpCrisscross 2y ago
  > several reports recently that the interest on our debt will exceed the defense budget within the next couple of years. Is that not accurate? This happened, I believe, in FY 2024 [1][2]. We're currently running a 6.5% primary deficit/GDP [3]. With real GDP growing around 2.5% a year [4], that means we need to cut about 4% of GDP, or $1.2tn [5], to stabilise our debt/GDP ratio. That's two Medicaids [6]. (Which would probably trigger a recession.) [1] https://comptroller.defense.gov/Portals/45/Documents/defbudget/FY2024/FY24_Green_Book.pdf https://comptroller.defense.gov/Portals/45/Documents/defbudg... $842bn [2] https://budget.house.gov/imo/media/doc/the_baseline_and_interest_costs.pdf https://budget.house.gov/imo/media/doc/the_baseline_and_inte... $870bn [3] https://bipartisanpolicy.org/report/deficit-tracker/ https://bipartisanpolicy.org/report/deficit-tracker/ [4] https://fredblog.stlouisfed.org/2024/06/how-much-did-the-us-economy-grow-last-year/ https://fredblog.stlouisfed.org/2024/06/how-much-did-the-us-... [5] https://fred.stlouisfed.org/series/GDP https://fred.stlouisfed.org/series/GDP [6] https://www.pgpf.org/article/budget-explainer-medicaid/ https://www.pgpf.org/article/budget-explainer-medicaid/
- phonon 2y ago
  It already was in 2024 (if you exclude veteran related costs.) Some of the increase is due to the government debt being larger, and some from interest rates rising. (The average interest rate we pay on our debt has doubled in the past 4 years, from 1.59% in 2020 to 3.28% in 2024.)
AnthonyMouse 2y ago
If you increased debt in the past, interest on the debt then becomes a recurring expense. You then have to reduce spending relative to taxes, not only to pay the interest, but to eventually pay down the principal if you ever want to stop paying the interest.
- blharr 2y ago
  Eh, not necessarily. Inflation will eventually reduce the effective principal amount over time and you would stop feeling the effect of any interest