Americans have been adding to their credit card debt at an alarming rate over the past two years, from $770 billion in early 2021 to over a trillion dollars earlier this year. Not surprisingly, the U. S. government, old Uncle Sam, has done the same. In the past three and a half years alone, he has added $9,000,000,000,000 ($9 trillion dollars) to our national credit card balance.
Amazingly, nine trillion was the total amount of national debt in 2007. That’s how much debt our uncle accrued over the course of the nation’s entire history!
Unfortunately, the “introductory” low-interest rate Uncle Sam paid on his credit card balance three years ago when he began running up this debt has ended – leaving Uncle Sam, and his taxpaying relatives, on the hook for ballooning interest payments. This means our debt servicing costs are growing much faster than the national debt – a frightening thought given how quickly the national debt has been growing. (RELATED: JOHN STOSSEL: Stop The ‘Emergency’ Spending Scam)
In August of 2021, Uncle Sam paid an average of 1.6% on his credit card balance. A year later, that number was 1.97%. A year after that, in August 2023, the average interest rate on his credit card balance had jumped to 2.9%.
If we make the plausible assumption that interest rates rise a similar amount over the next twelve months to 3.9% in August 2024, our average interest rate on U.S. debt for the next twelve months climbs to an average of 3.4% interest bringing our interest payments up to $1.122 trillion for the year. That would make interest on the debt the second largest budget item – right behind Social Security.
If the average rate settles at 3.9%, which is still below current government borrowing rates, and assuming no increase in the debt, interest payments in the following fiscal year, 2024-2025, will be $1.287 trillion, making interest the single largest government expense. (RELATED: REP. ANDY BIGGS: Congress Can’t Continue The Budget Insanity. We’re Standing Against A Continuing Resolution)
American voters will not be pleased to see Uncle Sam paying more money to bondholders than to senior citizens.
Like consumers plagued by spending problems and buried under a mountain of credit card debt, Uncle Sam needs to change his spending habits. Congress ought to rein in spending in the 2024 budget before the debt burden spirals out of control. Instead of adding money to the budget of every federal agency, they ought to at least freeze spending at current levels until Uncle Sam’s credit card balance stops increasing.
The longer Congress waits to deal with Uncle Sam’s credit card problem, the fewer options they will have and the more difficult it will be. And if they won’t fix Uncle Sam’s problem, his taxpaying relatives may need to stage an intervention.
Paul Mueller, PhD, is a Senior Research Fellow at the American Institute for Economic Research.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
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