Uncle Sam Will Pay $450 Billion This Year Just to Cover Interest on National Debt
December 15, 2008 - 7:48 PMA Treasury Department report says the federal government will make about $450 billion in interest payments on the national debt this year, making it the fourth largest expense in the federal budget behind Medicare-Medicaid, Social Security and defense spending.
The federal fiscal year runs from Oct. 1 through Sept. 30. The Treasury Department report presents the budget estimates for the full fiscal year 2009, which the interest payment and federal department budget projections are based upon.
If President-elect Barack Obama and the Democratic congressional leadership enact a proposed $1 trillion stimulus plan in early 2009, it could add about $50 billion to those annual interest payments, budget experts told CNSNews.com on Monday.
According to the Treasury Department report, released on Dec. 10, the federal government expects to pay $449,070,000.00 in interest on Treasury debt securities for FY 2009.
The Health and Human Services budget, which includes Medicare and Medicaid, will cost $739,241,000.00 for the fiscal year; Social Security Administration, $699,976,000.00; and the Defense Department-Military budget, $656,722,000.00. (Estimates by the White House’s Office of Management and Budget are nearly identical.)
Chris Edwards, director of tax policy studies at the libertarian Cato Institute, told CNSNews.com on Monday that the money paid by the Treasury for interest is different than other expenditures, because it does not directly benefit taxpayers.
“It represents money that can’t be used for tax reduction or spending programs,” said Edwards.
If the Obama administration is able to enact a $1 trillion stimulus package, taxpayers can expect to see $50 billion added to the annual payment, because the federal government usually borrows at an interest rate of about 5 percent, said Edwards and Brian Riedel, the latter who is a senior policy analyst at the Heritage Foundation.
The Wall Street Journal reported on Saturday that Obama's team is considering a stimulus package for the faltering U.S. economy that could reach $1 trillion over two years.
“The fact that we are borrowing a trillion dollars means that someone has to pay that back,” said Edwards. “The economic fact is that while Americans are consuming a trillion more in stuff this year, people in later years will have to pay for it.”