Making hundreds of billions in interest payments will cause the next US financial catastrophe.

The U.S. national debt keeps rising is making issues worse, and to make matters worse, interest rates on the debt are increasing even more quickly.

The Treasury Department will release data report for the final month of fiscal year (FY) 2022 will be released next week. It will include information on the amount of money the government spent paying off its record-breaking $31 trillion national debt.

Data from the Treasury show that until August, which includes all months of FY22 other than the last, net interest payments on the debt came to $471 billion. With the addition of September’s statistics, the total might exceed $500 billion. This is already significantly more than the initial White House prediction of $357 billion and above the Treasury’s mid-year assessment of $441 billion.

At that level, interest on the debt rivals the annual funding provided by Congress to the Department of Defense and exceeds the discretionary budgets of the majority of federal agencies.


Janet Yellen testifying before Congress

According to experts, one factor contributing to the underestimation of the cost of debt payment was the fact that the calculations were prepared when interest rates were lower. The Federal Reserve has been raising interest rates during the past few months, which implies that when existing federal debt matures and is repaid by issuing new debt (or “rolling over”), the interest rates on the new debt will be higher.

Some predict that the interest payments on the loan will skyrocket in the coming years as a result of these rising rates. The Peter G. Peterson Foundation cautions that paying more to service the national debt entails diverting funds from other priorities; this is not just an accounting exercise.

For instance, according to the foundation, interest on the debt would eventually cost more than all federal income support programs combined, including unemployment, food stamps, and child feeding, by the end of the next year. By 2032, interest on the debt may reach $1 trillion annually, or $3 billion daily, and consume roughly one-fifth of all federal receipts.


President Joe Biden Treasury Yellen national debt Congress interest payments

According to Michael A. Peterson, CEO of the foundation, “interest charges alone will total more than $8 trillion over the next decade, gobbling up more of our budget than ever, damaging our economy and diminishing our ability to address national objectives.” “Americans understand this presents severe budgetary and economic issues for our future since rising interest rates entail higher interest costs on that debt,” the statement reads.

The Treasury has already acknowledged that fluctuating interest rates might cause unforeseen increases in the cost of servicing the debt. Because of “higher-than-projected borrowing costs on inflation-protected assets owned both by the public and by government accounts,” the Treasury stated that interest on the debt was higher than predicted last year, for instance.

Renewed calls for a balanced federal budget that at least prevents the government from borrowing more are being made as a result of the combination of a record-high national debt and the possibility of paying a higher penalty for carrying that debt.


A photo of Kevin McCarthy Biden Treasury Yellen national debt Congress interest payments

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, noted that President Biden had authorized $4.9 trillion in new deficits since entering office and $1.9 trillion in extra borrowing just in 2022. “We are dependent on debt.”

It’s time to remind decision-makers that they have the power to stop the growth of the national debt, she continued. It cannot be too much to ask that they practice paying for their priorities by refraining from any new borrowing for only three months. “At the very least, they should pledge to no further borrowing in 2022.