The government debt continues to grow, as does the interest cost.
Welcome to Friday’s financial fitness. I know that I have talked before a lot about our governments overall debt. But today I wanted to share with you the status of where we are and also look back at where we have come from and into the future of potentially where we may be headed.
According to Wikipedia, in 2018 the overall government debt is at $21.6 trillion. The $21.6 Trillion consists of public debt at $15.8 trillion and also consists of $5.8 trillion which is intragovernmental debt which includes trust funds loaned back to Social Security and Medicare.
What is the 10-year forecast for this deficit?
According to the CBO which is the Congressional Budget Office, in their 10 year outlook from 2018 – 2028, they project the sum of the annual deficits to be $11.7 trillion between now and 2028 and if we add that to our current debt of $21.6 trillion, the projection by the year 2028 of the overall debt as a country will be $33.4 trillion.
One of the concerns that get brought up is the cost of servicing that type of debt. According to the CBO, the cost of servicing the US national debt can be measured in various ways. However, the CBO analyzes net interest as a percentage of our overall GDP or gross domestic product. With the higher percentage indicating the highest interest rate payment burden to the US government.
What will happen to the interest payments?
The CBO’s baseline shows net interest payments tripling under the current law, climbing from 230 billion in 2013, all the way up to 709 billion in 2024. This amount would represent approximately 33% of our GDP which is the highest level since 1996. As of fiscal 2017, the average interest rate on the government’s debt is at 2.26% and the concern is as our overall debt grows and the interest rates go higher it could become a larger and larger percentage of our GDP.