The United States government is to pay some $800 billion a year just in interest for its ballooning public debt according to the Congressional Budget Office (CBO).
“Gross interest outlays are projected to decline from $474 billion in 2021 to $450 billion in 2024 before rising to more than $800 billion in 2030, totaling $5.4 trillion over the decade.
Over that same period, the average interest rate on public debt is projected to decrease from 1.5 percent in 2021 to 1.2 percent in 2024 before rising to 2.1 percent in 2030,” they say.
This projected decrease is due to the maturity length of treasury bonds that have already been sold at record low interest rates this year.
They apparently expect this to have a knock on effect until 2024, but say just a 0.1% difference in their projected interest rates brings debt interest costs to $1.2 trillion a year by 2030.
The United States government currently spends about $700 billion a year on the army, its biggest expense, with another $700 billion going to pensions, medicare and the like.
Education gets just $100 billion, if that. Debt interest currently stands at more than $300 billion, its third biggest expense.
By 2030, just paying interest on debt will cost America more than any other expense. Even with net interest, which accounts for what the government itself receives in interest due to its loans and so on, the US government will still be spending $670 billion on interest for its debt:
CBO says their “forecasts of interest rates have exhibited larger mean errors than its forecasts of other economic indicators,” with the office in particular overestimating interest rates in the past.
They may now be underestimating them as they project interest payments won’t reach again current levels in seven years.
Even under these assumptions, however, the government debt will get so large to the point America has to fund a second US army just to cover interest on debt.
That suggests the chances America can even begin to think of reducing the capital, currently standing at nearly $30 trillion, are very low.
This huge burden could be reflected down the line by the fact the government can’t afford to pave roads for example, or to build nice new schools in a timely manner, or reconstruct schools, hospitals, or indeed upgrade the technology they are using.
That doesn’t happen instantly, but by thousands of decisions here and there that postpone projects or leave out what would be ‘nice to have’ or crowd out useful public investments.
In addition this huge unpayable debt level means taxes are increasing at a significant rate through the increase in prices of assets like land and housing, making expanding businesses a more costly endeavor in addition to eating out an ever increasing slice of wages.
Energy costs too and other ‘hard’ necessities might increase especially if America can’t afford high risk investments like hydrogen fuel.
That’s obviously if you’re not hedging all this. Having savings in hard assets like bitcoin can allow plenty to escape the stealth tax imposed through increasing government debt.
Land will always be necessary, but linking pensions to stocks could offer a way out for many too.
That however brings its own problem which can best be described as the end of meritocracy due to the creation of a two class society: the asset holders and all the rest.
It’s unlikely there will be any change any time soon however to the endless money printing as otherwise the government would be bankrupt.
Hence the growing popularity of bitcoin which has outperformed every other asset every single year since it launched, save for 2014 and 2018, due to its devaluation reducing with every halvening.