The federal government’s payments for interest on the national debt could soon surpass outlays for the military, Medicaid or children’s programs, The New York Times reported Tuesday.
> The run-up in borrowing costs is a one-two punch brought on by the need to finance a fast-growing budget deficit, worsened by tax cuts and steadily rising interest rates that will make the debt more expensive.
> With less money coming in and more going toward interest, political leaders will find it harder to address pressing needs like fixing crumbling roads and bridges or to make emergency moves like pulling the economy out of future recessions.
> Within a decade, more than $900 billion in interest payments will be due annually, easily outpacing spending on myriad other programs. Already the fastest-growing major government expense, the cost of interest is on track to hit $390 billion next year, nearly 50 percent more than in 2017, according to the Congressional Budget Office.
According to economists, the current situation puts lawmakers in wholly new territory — this is not business as usual.
> In the past, government borrowing expanded during recessions and waned in recoveries. That countercyclical policy has been a part of the standard Keynesian toolbox to combat downturns since the Great Depression.
> The deficit is soaring now as the economy booms, meaning the stimulus is pro-cyclical. The risk is that the government would have less room to maneuver if the economy slows.
Harvard economist Jeffrey Frankel told The Times that “this sort of aggressive fiscal stimulus is unprecedented in U.S. history.”
> “There will eventually be another recession, and this increases the chances we will have to slam on the brakes when the car is already going too slowly,” Mr. Frankel said.
> “By 2020, we will spend more on interest than we do on kids, including education, food stamps and aid to families,” said Marc Goldwein, senior policy director at the Committee for a Responsible Federal Budget, a research and advocacy organization.