SACHA PFEIFFER, HOST:
The U.S. government's debt has reached a new high, or a new low, depending on your point of view.
LEILA FADEL, HOST:
A daily update from the Treasury Department on Wednesday said the federal debt had topped $40 trillion. This year alone, Washington is adding more than $2 trillion in red ink, and that's driving up interest expenses for the government and everyone else.
PFEIFFER: NPR's Scott Horsley joins us to explain. Hi, Scott.
SCOTT HORSLEY, BYLINE: Good morning, Sacha.
PFEIFFER: All right, Scott, we're not in a recession, we're not in a pandemic. Things like that might justify the debt. So why is the debt growing so fast?
HORSLEY: It's growing because the government is spending more than it takes in, by a pretty wide margin. Last year, the GOP Congress voted to extend the 2017 tax cuts, so tax revenue's growing more slowly than it otherwise would. The administration had hoped to offset some of that with the tariff revenue, but, of course, a lot of the president's tariffs were struck down by the Supreme Court, so the government's actually had to refund more than $100 billion it collected.
And meantime, spending just keeps going up. You know, a lot of the increased spending is the result of our aging population, which drives up costs for things like Medicare. But Carolyn Bourdeaux, who heads a deficit watchdog group called the Concord Coalition, says some of it's driven by the growth of the debt itself.
CAROLYN BOURDEAUX: The 40 trillion itself is just a number, but you have to think about the impact that that will have on the interest payments. We are now spending more on interest than we spend on national defense. It is one of the highest categories in terms of our expenditures and it is one of the fastest growing.
HORSLEY: The government is spending more than $1 trillion this year just paying interest on the debt, and that's about 15% more interest than the government had to pay last year.
PFEIFFER: Yeah. And those growing interest payments are problematic. Explain what's behind the big jump in the interest payments.
HORSLEY: Well, it's partly because the debt itself has gotten so big. You know, when you carry a big balance on your credit card, the interest payments go up. But it's also because the people who lend the government money are demanding higher interest rates now. This week, the interest rate on a 30-year government bond was the highest it's been in almost two decades. And Bordeaux says that drives up borrowing costs for everyone else.
BOURDEAUX: Those interest rates are linked to everybody's mortgage payments. They're linked to small business loans. They're linked to the cost of living for Americans across the country.
HORSLEY: Mortgage rates, for example, have climbed to about 6.7%, and, of course, that's making it harder for people who are trying to buy their first home.
PFEIFFER: Very hard. Scott, is there any movement in Washington to get control over this growing debt?
HORSLEY: Some members of Congress have started making noises about, you know, maybe setting up a fiscal commission of some sort, but those efforts don't seem to be getting a lot of traction so far. And let's face it, most voters are not screaming that they want to pay higher taxes or see their own government benefits cut. Maybe that will start to change as these borrowing costs continue to climb and become an even bigger drag on the U.S. economy.
What's really remarkable about all this red ink is that it's coming at a time of relative prosperity. You know, the government used to run big deficits in hard times but then shrink those deficits relative to the economy in good times. That's no longer the case. And Bordeaux says that raises the risk that the next time the country faces some big challenge, it may not have the fiscal flexibility it would like.
BOURDEAUX: One of the problems with running deficits at times like this is what do you do when you hit a really serious crisis? What do you do when you hit a recession? What happens if we have another pandemic? What happens if we have an international global crisis, a war? We don't have a lot of headroom to issue more debt.
HORSLEY: Now, the U.S. was fortunate during previous crises that it was able to borrow a lot of money at relatively low cost, but we can't take it for granted that will always be the case.
PFEIFFER: NPR's Scott Horsley, thank you.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
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