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The US Government May Soon Be Spending More On Interest Payments Than On Defense Due To The Debt Mountain’s Rapid Growth

Student Loan
Student Loan; Source- MARCA

This year, investors are becoming concerned about the US’s massive debt load. Capital Group projects that during the next five years, interest payments will account for a larger portion of government spending than defense. The investment manager believes that the growing debt load will eventually reduce the demand for Treasury bonds.

According to Capital Group, the government may soon be spending more on interest payments than on defense as a result of the US’s mounting debt, which is increasing daily.

In a research paper from October, US asset manager economist Darrell Spence stated, “US debt dynamics are evolving in a way that requires attention.” “Over the next five years, net interest payments on the debt are expected to surpass defense spending.”

Spence also stated that the government’s spending on net interest payments might go from less than $500 billion to an astounding $1.4 trillion by 2033 if the debt load of the greatest economy in the world increases at the rate predicted by the Congressional Budget Office.

The Congressional Budget Office And Capital Economics

US Government

Source- Forbes

Policymakers may be concerned about the possibility that interest payments would soon exceed defense spending, given that President Joe Biden promised on Monday to ask Congress for more than $100 billion in funding to defend Israel and Ukraine.

With Congress striking an 11th-hour agreement to raise the government borrowing limit back in May and Treasury bonds seeing one of the biggest sell-offs in market history, debt has become a key concern for Wall Street this year.

On September 18, the US government’s liabilities surpassed an astounding $33 trillion; one month later, the amount had increased to $33.64 trillion, meaning a growth of $20 billion on average every day.

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