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Interest Payments on The National Debt Tops $1 Trillion for the First Time

September 11, 2024

For the first time, the U.S. government has exceeded $1 trillion in interest payments on its $35.3 trillion national debt this year, according to the Treasury Department’s report on Thursday.

With the Federal Reserve maintaining its highest benchmark rates in 23 years, the government has spent $1.049 trillion on debt servicing, marking a 30% increase from the previous year. This is part of an estimated $1.158 trillion in total payments for the year.

After accounting for interest earned from its investments, the net interest payments have reached $843 billion, making it the second-largest expenditure category after Social Security and Medicare.

This rise in debt service costs coincided with a sharp increase in the U.S. budget deficit, which nearly hit $2 trillion for the year by August.

With one month remaining in the fiscal year, the August deficit surged by $380 billion, a significant shift from the $89 billion surplus of the same month last year, which was largely influenced by student debt forgiveness accounting adjustments.

As of now, the 2024 deficit stands at just under $1.9 trillion, reflecting a 24% increase compared to the previous year.

The Federal Reserve is widely anticipated to cut rates next week, which would bring Treasury yields down, but the markets are divided on whether we will see a 25 or 50-basis point cut.

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