Move Over, Military Budget! This Unexpected Expense Is Taking Over Washington's Checkbook

By Alan Hume | Friday, 12 April 2024 01:00 AM
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Move Over, Military Budget! This Unexpected Expense Is Taking Over Washington's Checkbook

The Congressional Budget Office (CBO) has reported that the net interest on the federal debt surpassed defense spending in the first half of the fiscal year 2024.

This comes as government expenditure continues to mount and interest rates persist at high levels.

The CBO estimates that the net interest on the U.S. government's public debt amounted to approximately $440 billion from October to March of the fiscal year 2024. This figure represents a 43% increase from the $308 billion recorded in the same period of the fiscal year 2023. In contrast, spending on the U.S. military saw a modest 8% increase, rising from $386 billion to $412 billion.

The CBO further reports that total spending for the first half of the fiscal year 2024 escalated to roughly $3.25 trillion, marking a 6% increase from the $3.15 trillion spent in the previous year. Despite revenues rising by 7% or $140 billion, the deficit still reached $1.1 trillion, a mere $37 billion less than the same period last year.

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Social Security continues to be the most significant expenditure, with spending increasing by approximately 9% from $652 billion in the first half of the fiscal year 2023 to $711 billion in the same period this year. Interestingly, the costs of Medicare and Medicaid, which stood at $389 billion and $304 billion respectively, were both surpassed by interest payments.

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The surge in interest payments is primarily attributed to the increase in interest rates, driven by hikes to the federal funds rate. The Federal Reserve has set the rate between 5.25% and 5.50%, the highest in 23 years, in an attempt to curb high inflation. Inflation peaked at 9.1% in June 2022 and has remained high since, rising 3.2% in February, significantly above the Fed's 2% target.

The national debt now stands at $34.6 trillion, as reported by the Treasury Department. In February, the federal government's expenditure was $567 billion, more than double the $271 billion it collected.

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