The US’s mountain of debt has become a cause of concern for investors this year.
The government is likely to spend more on interest payments than on defense over the next five years, per Capital Group.
The ballooning debt burden could eventually chip away at the demand for Treasury bonds, according to the investment manager.
The US’s mountain of debt is growing every day – and the government could soon be spending more on interest payments than on defense, according to Capital Group.
“US debt dynamics are evolving in a way that requires attention,” Darrell Spence, an economist for the US asset manager, said in a research note last week. “Over the next five years, net interest payments on the debt are expected to surpass defense spending.”
Spence added that if the world’s largest economy’s debt pile rises at the rate expected by the Congressional Budget Office, the government’s spending on net interest payments could rise from under $500 billion to a staggering $1.4 trillion by 2033.
The idea that interest payments could soon surpass defense spending could be a source of concern for policymakers, with President Joe Biden pledging Monday to ask Congress for over $100 billion worth of funding to support both Israel and Ukraine.