{"id":2211968,"date":"2024-04-03T05:24:02","date_gmt":"2024-04-03T09:24:02","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/soaring-interest-costs-to-exceed-defense-spending-as-government-faces-fiscal-reckoning\/"},"modified":"2024-04-03T05:24:29","modified_gmt":"2024-04-03T09:24:29","slug":"soaring-interest-costs-to-exceed-defense-spending-as-government-faces-fiscal-reckoning","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/soaring-interest-costs-to-exceed-defense-spending-as-government-faces-fiscal-reckoning\/","title":{"rendered":"Rising interest expenses set to surpass defense budget amid government&#8217;s fiscal challenges"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"&quot;\"><div class=\"counts mashsbcount\">24<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Fsoaring-interest-costs-to-exceed-defense-spending-as-government-faces-fiscal-reckoning%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=2211968&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><p>Interest costs are projected to\u200d exceed defense spending, \u200csignaling deep fiscal challenges \u200dahead. The U.S. faces significant net interest payments, surpassing defense\u200b expenditure. \u2062Accelerated borrowing during\u200c the pandemic continues to impact the economy. Rising interest\u2064 rates prompt\u200d higher government expenses, emphasizing the need for decisive action from\u200b lawmakers to curb borrowing \u200cand address escalating financial concerns.  <\/p>\n<p class=\"readmore\">\n    <button onclick=\"showReadMore()\" id=\"readmorebtn\">Read more&#8230;<\/button>\n<\/p>\n<hr id=\"line\">\n<span id=\"more\"><\/p>\n<div>\n<p>Soaring <a href=\"https:\/\/www.washingtonexaminer.com\/tag\/interest-rates\" target=\"_blank\" rel=\"noopener\" title>interest<\/a> costs are set to exceed all <a href=\"https:\/\/www.washingtonexaminer.com\/tag\/defense\" target=\"_blank\" rel=\"noopener\" title>defense<\/a> spending this year, with the gap only growing over the next decade as lawmakers stare down major fiscal problems.<\/p>\n<p>This year, the United States will be shackled with $870 billion in payments on net interest. That is nearly 5.7% more than the $822 billion the government will spend on national defense, according to budget <a href=\"https:\/\/www.cbo.gov\/system\/files\/2024-02\/59710-Outlook-2024.pdf\" target=\"_blank\" rel=\"noopener\" title>projections<\/a> from the <a href=\"https:\/\/www.washingtonexaminer.com\/tag\/cbo\" target=\"_blank\" rel=\"noopener\" title>Congressional Budget Office<\/a>.<\/p>\n<p>Interest costs exceeding annual defense costs for the first time is an indication of the problems that will arise thanks to borrowing that soared during the pandemic and has remained high even as the economy has recovered. <\/p>\n<p>The government shells out more money, by far, on its military and defense than any other country in the world. Yet, that category of spending is set to be far exceeded by payments on the debt. A decade from now, in 2034, annual interest costs are projected to be a whopping $1.6 trillion. That is a staggering 45% higher than the U.S. is forecast to spend on defense in the same year.<\/p>\n<p>\u201cLong term, interest is going to be the biggest part of the federal budget and could cost as much as half to three-quarters of all taxes,\u201d said Brian\u00a0Riedl, a budget expert at the right-leaning\u00a0Manhattan\u00a0Institute. \u201cInterest costs have already passed Medicaid, they are passing defense this year, by 2028 they will exceed Medicare, and by 2042 they will exceed Social Security to become the most expensive part of the budget.\u201d<\/p>\n<p>Net interest costs as a share of gross domestic product are also rising. In 2023, net interest made up 2.5% of GDP. That will balloon to nearly 4% of GDP by the end of the coming decade. Meanwhile, discretionary defense spending will fall from about 3% of GDP to 2.5%, according to the CBO projections.<\/p>\n<p>Borrowing costs have risen very quickly over the past few years as inflation took off and the Federal Reserve raised its interest rate target. Higher rates mean the government needs to pay more in interest to borrow, a reality that has heightened the urgency for lawmakers to act.<\/p>\n<p>Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a group that favors lower deficits, told the <em>Washington Examiner<\/em> that for years interest rates stayed \u201cstunningly low,\u201d leading to some analysts encouraging the federal government to borrow and spend.<\/p>\n<p>\u201cSo here we are at a moment when we are reminded of reality, that extra borrowing leads to higher interest rates, but because we did indeed borrow more and because we were hit with the crisis of [the pandemic], every small increase in interest rates is a very significant increase in our interest payments,\u201d she said.<\/p>\n<p>MacGuineas emphasized that the government is highly sensitive to interest rate increases.<\/p>\n<p>Years of ultralow interest rates, which saw the yields on 10-year Treasury securities falling well below 1% during the pandemic, had allowed the federal government to take on huge amounts of debt with fewer ramifications. <\/p>\n<p>\u201cCongress and the White House went on a long-term borrowing spree on the belief that interest rates would never rise again,\u201d Riedl told the <em>Washington Examiner<\/em>. \u201cEssentially, Congress and the White House gambled our long-term solvency on interest rates staying low forever. The fact that interest rates are now rising is combining with a soaring national debt to create a potentially calamitous set of costs.\u201d<\/p>\n<p>Federal debt is also rising, and fast. In March, the CBO said federal\u00a0debt\u00a0held by the public\u00a0will balloon to 107% of the country\u2019s\u00a0GDP\u00a0by 2029, <a href=\"https:\/\/www.washingtonexaminer.com\/policy\/finance-and-economy\/2930050\/congressional-budget-office-projects-massive-debt-reckoning-despite-some-improvements\/\" target=\"_blank\" rel=\"noopener\" title>the highest level on record<\/a>. It will then grow to 166% by 2053.<\/p>\n<p>MacGuineas pointed out that the fiscal reckoning and higher interest costs come at a time of geopolitical tension and friction across the globe.<\/p>\n<p>For instance, since Russia invaded Ukraine in early 2022, the two countries have been in an entrenched war that still threatens to pull in other countries and further destabilize Europe. Last year, Hamas terrorists launched a brutal attack against Israeli civilians and set off the biggest military escalation in the region since the Yom Kippur War more than a half century ago.<\/p>\n<p>Add to that the growing military competition between the U.S. and China and uncertainty with Taiwan, and the federal government\u2019s fiscal problems become more worrying.<\/p>\n<p>\u201cAt a time where our huge interest payments are starting to dwarf many of our government programs and even eclipse defense spending, it demonstrates how dangerous it is to be overindebted as we are when you may need your budget for other purposes,\u201d MacGuineas said. \u201cRight now is a time where we would want to be thinking about global strategy.\u201d<\/p>\n<p>\u201cBut our hands are tied because of these huge interest payments and they are only going to grow \u2026 until we make dramatic shifts,\u201d she added.<\/p>\n<p>To lower borrowing, lawmakers would have to make some politically unpopular decisions, such as cutting popular programs or raising taxes, which could threaten their careers.<\/p>\n<p>But there have been some steps in the right direction in recent months, according to budget experts.<\/p>\n<p>House Speaker Mike Johnson (R-LA), in his first floor speech as leader of the House last year, used the opportunity to draw attention to the country\u2019s financial situation. He proposed a <a href=\"https:\/\/www.washingtonexaminer.com\/news\/2586633\/speaker-johnson-eyes-debt-commission-with-goal-of-righting-countrys-fiscal-ship\/\">bipartisan fiscal commission<\/a> to lower deficits and debt.<\/p>\n<p>\u201cThe consequences if we don\u2019t act now are unbearable. We have a duty to the American people to explain this to them so they understand it well,\u201d Johnson told fellow lawmakers. \u201cWe are going to establish a bipartisan debt commission to begin working on this crisis immediately,\u201d Johnson added.<\/p>\n<p>In January, the House Budget Committee voted to advance bipartisan legislation that would form a panel consisting of both Republican and Democratic lawmakers from both chambers of Congress, in addition to outside experts. The committee would work to produce a report and propose legislation that would stabilize the ratio of public debt to GDP to at or below 100% within 10 years.<\/p>\n<p><strong><a href=\"https:\/\/www.washingtonexaminer.com\/\" target=\"_blank\" rel=\"noreferrer noopener\">CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER<\/a><\/strong><\/p>\n<p>But a commission would only work if those involved are able to make decisions that may be very unpopular. Democrats and many Republicans have essentially said that programs like Social Security and Medicare are untouchable. Republicans also want to extend the 2017 Tax Cuts and Jobs Act, which forecasters say would cost an additional $3.5 trillion over the next decade.<\/p>\n<p>\u201cThe projected debt is a massive ship that cannot be turned around very quickly,\u201d Riedl warned on Tuesday.<\/p>\n<\/p><\/div>\n<p><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Interest costs will surpass defense spending this year, with the gap widening in the next decade due to escalating fiscal challenges. The U.S. faces $870 billion in net interest payments, surpassing the $822 billion government expenditure by nearly 5.7%<\/p>\n","protected":false},"author":2683,"featured_media":2211969,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"https:\/\/wex-s3.s3.us-east-1.amazonaws.com\/wp-content\/uploads\/2024\/02\/printing-money-1024x591.jpg","fifu_image_alt":"","footnotes":""},"categories":[538],"tags":[],"class_list":["post-2211968","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-washington-examiner"],"fifu_image_url":"https:\/\/wex-s3.s3.us-east-1.amazonaws.com\/wp-content\/uploads\/2024\/02\/printing-money-1024x591.jpg","_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/2211968","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/2683"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=2211968"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/2211968\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/2211969"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=2211968"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=2211968"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=2211968"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}