There’s Nothing to Fear But the Debt Itself

Treasury Department building in Washington, DC Treasury Department building in Washington, DC Jacquelyn Martin/AP File Photo

Quick, which segment of federal spending will grow fastest from 2015 through 2021? Did you guess Medicare? If you did, you’d be wrong.

It’s an underappreciated fact that a significant contributor to the ballooning debt is ... the debt itself. Federal interest payments are projected to grow faster over the next decade than any other broad category of expenditures, outpacing spending on Medicare, Medicaid, and Social Security. Even a small, sudden shift in the interest rate on government debt could inflate deficits by trillions of dollars over the next decade.

It’s “the issue that concerns me more than anything else,” said former longtime Senate Budget Committee staffer William Hoagland at a recent panel on the budget. “It’s the level of debt as a combination of interest rates plus the level of accumulated debt that’s really explosive in the out years,” he said at the panel hosted by the Bipartisan Policy Committee, where he now works as a senior vice president.

Lawmakers and experts are rightly focused on entitlement reform because spending for those programs is so huge. Interest spending is projected to grow quickly in the near term, but it still makes up only a small portion of the debt. That could grow quickly, though, according to the nonpartisan Congressional Budget Office.

Interest rates fluctuate in response to a variety of factors, including expected inflation, Federal Reserve policy, and domestic and global economic strength. But if economists polled in the October and February Blue Chip Economic Indicators surveys are right about their rate predictions, it would mean that the CBO—Congress’s budget scorekeeper—is underestimating the size of the 10-year budget deficit to the tune of $1.1 trillion.

In other words, the upward shift in interest rates would eradicate most of the savings from the roughly $1.2 trillion in painful spending cuts implemented under sequestration over the next decade. Lawmakers in both parties are currently trying to reduce deficits over by about $4 trillion in roughly that time frame, too. If interest rates returned to 1980s levels, CBO says deficits would swell by $6.2 trillion instead.

Over the long term, interest spending will become an increasingly large burden unless something is done about the debt broadly. And the Treasury Department has a graph in its  “Citizen's Guide to the Fiscal Year 2012” that shows the potential scale of the problem. (It should be noted that economic predictions even 10 years out are notoriously subject to error. Longer-term projections like the one below are even harder to get right, but they can still prove instructive in understanding the makeup and path of the debt.)

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
Close [ x ] More from GovExec

Thank you for subscribing to newsletters from
We think these reports might interest you:

  • Sponsored by Brocade

    Best of 2016 Federal Forum eBook

    Earlier this summer, Federal and tech industry leaders convened to talk security, machine learning, network modernization, DevOps, and much more at the 2016 Federal Forum. This eBook includes a useful summary highlighting the best content shared at the 2016 Federal Forum to help agencies modernize their network infrastructure.

  • Sponsored by CDW-G

    GBC Flash Poll Series: Merger & Acquisitions

    Download this GBC Flash Poll to learn more about federal perspectives on the impact of industry consolidation.

  • Sponsored by One Identity

    One Nation Under Guard: Securing User Identities Across State and Local Government

    In 2016, the government can expect even more sophisticated threats on the horizon, making it all the more imperative that agencies enforce proper identity and access management (IAM) practices. In order to better measure the current state of IAM at the state and local level, Government Business Council (GBC) conducted an in-depth research study of state and local employees.

  • Sponsored by Aquilent

    The Next Federal Evolution of Cloud

    This GBC report explains the evolution of cloud computing in federal government, and provides an outlook for the future of the cloud in government IT.

  • Sponsored by Aquilent

    A DevOps Roadmap for the Federal Government

    This GBC Report discusses how DevOps is steadily gaining traction among some of government's leading IT developers and agencies.

  • Sponsored by LTC Partners, administrators of the Federal Long Term Care Insurance Program

    Approaching the Brink of Federal Retirement

    Approximately 10,000 baby boomers are reaching retirement age per day, and a growing number of federal employees are preparing themselves for the next chapter of their lives. Learn how to tackle the challenges that today's workforce faces in laying the groundwork for a smooth and secure retirement.

  • Sponsored by Hewlett Packard Enterprise

    Cyber Defense 101: Arming the Next Generation of Government Employees

    Read this issue brief to learn about the sector's most potent challenges in the new cyber landscape and how government organizations are building a robust, threat-aware infrastructure

  • Sponsored by Aquilent

    GBC Issue Brief: Cultivating Digital Services in the Federal Landscape

    Read this GBC issue brief to learn more about the current state of digital services in the government, and how key players are pushing enhancements towards a user-centric approach.

  • Sponsored by CDW-G

    Joint Enterprise Licensing Agreements

    Read this eBook to learn how defense agencies can achieve savings and efficiencies with an Enterprise Software Agreement.

  • Sponsored by Cloudera

    Government Forum Content Library

    Get all the essential resources needed for effective technology strategies in the federal landscape.


When you download a report, your information may be shared with the underwriters of that document.