(MENAFN – The Rio Times) The U.S. government is facing a serious issue as its debt interest costs have reached their highest since the 1990s. This raises concerns for the next administration in Washington.
In the fiscal year ending in September, the U.S. Treasury spent around $882 billion on interest payments, equating to about $2.4 billion daily and 3.06% of GDP.
Key reasons for rising interest costs include high budget deficits, increased spending on Social Security and Medicare, and expenses related to COVID-19. The 2017 tax cuts also reduced government revenue, while inflation has led to higher borrowing costs.
The interest payments now exceed the military budget and account for nearly 18% of federal revenue—almost double from two years ago. This situation poses a challenge for the next administration, especially with a divided Congress.
The Federal Reserve’s lowering of interest rates provides some relief, but total public debt is nearing $27.7 trillion. Economists warn that high interest payments could slow economic growth by reducing private investment.
Despite Treasury Secretary Janet Yellen’s reassurances, many economists predict rising debt regardless of the election outcome. Upcoming challenges will include navigating Social Security and Medicare costs due to an aging population, impacting budget deficits for years to come.
Discretionary spending has already dropped to only 30% of federal expenditure from 70% in the 1960s. Currently, investors are not overly concerned about U.S. fiscal issues, but a change in market sentiment could affect future policies.
In summary, we can expect significant discussions about tax policies, spending priorities, and fiscal health in the years ahead.
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