At the time of writing, the U.S. public debt stands at $18.1 trillion. (Source: U.S. Treasury Direct, last accessed July 22, 2015.) Doing simple math; with a population of 318.9 million, each man, woman, and child in the United States owes roughly $57,000!
According to the Congressional Budget Office (CBO), between 2016 and 2025, the U.S. government is expected to incur cumulative budget deficits of $7.2 trillion. (Source: Congressional Budget Office, last accessed July 22, 2015.)
So, if the U.S. government registers a deficit of $7.2 trillion in the next 10 years, the national debt will increase to at least $25.3 trillion! Yes, the government itself is predicting a national debt of $25.3 trillion within the next 10 years.
But if we are more conservative with the numbers and consider such items as national disasters, wars, student debt defaults, another financial crisis, bailing out underfunded state pension plans, rising interest rates, and shoring up our underfunded social security and health programs; we are in serious debt trouble.
Interest Payment on National Debt; Biggest Expense in June
It is surprising to see how sometimes it’s completely forgotten that the U.S. government has to pay interest on the money it borrows, just like individuals. The higher the national debt goes, the bigger the interest payments become.
Consider this: in the month of June 2015, the U.S. government paid $93.0 billion in interest. This was the biggest of all the expenses the government incurred for the month of June!
For the government’s fiscal year that ends this September 30, it is expected to pay $431.59 billion in interest payments on a national debt of about $18.1 trillion. The government’s interest payments will only rise as the national debt increases. In fact, as the government continues to incur budget deficits, it will have to borrow more, and pay more in interest, further propelling our national debt.
The Road to a National Debt of $36.0 Trillion
Dear reader, the U.S. government is like a family that spends more than it earns. Only, in the case of the government, it can spend without remorse because there are no repercussions for its skyrocketing debt level.
Long-term readers know my prediction: we are headed to a national debt of $36.0 trillion over the next 10 to 15 years. I base this forecast on the fact that CBO expectations are based on current market conditions. Moreover, they don’t consider factors like national disasters, wars, student debt defaults, another financial crisis, the bailout of underfunded state pension plans, increasing interest rates, and the shoring up of our underfunded social security and health programs
Going back in history; whenever a country witnessed a rapid rise in its national debt, its currency was ultimately decimated; the most recent example would be Japan. Its public debt soared, and the value of the Japanese yen compared to other major currencies collapsed. Don’t be fooled by the short-term rally in the U.S. dollar; it won’t last, as the skyrocketing national debt is working against it.