Debt interest exceeds defense spending for the first time, accounting for 18% of revenue! How long will the market continue to tolerate the United States?

 In the 2024 fiscal year, the total expenditure of the US federal government amounted to $6.75 trillion, an increase of $617 billion compared to the 2023 fiscal year, representing a 10.1% growth, with the ratio to GDP rising from 22.5% to 23.4%. Among them, Social Security expenditures increased by $103 billion, a 7% increase, and defense spending increased by $500 billion, a 6% year-on-year growth.

The Fed's short-term benchmark interest rate averaged less than 0.75% in the decade before 2019; policymakers predicted in September that over time, rates will stabilize at around 2.9%. Meanwhile, as the US population ages, costs related to social security and Medicare will continue to rise, and unless reformed, the budget deficits in the US for the next few decades will be very large.

On Friday, October 18th, Eastern Time, the US Department of the Treasury announced that for the fiscal year ending September 30, 2024, the US federal government's fiscal deficit reached $1.833 trillion, the third highest on record, only surpassed by the 2020 and 2021 fiscal years during the COVID-19 pandemic.

Once investors start to worry, this could have a significant impact on the US economy The United States has long had the world's largest defense budget, but this expenditure is now being rapidly surpassed by the fastest-growing part of the federal budget - interest payments on debt.

In the 2024 fiscal year, the US Department of the Treasury's net interest payments exceeded defense spending for the first time, with the debt interest burden reaching a 28-year high.

According to official US data, net interest payments for this fiscal year exceeded defense spending at $874 billion, with interest accounting for about 18% of federal revenue, nearly double what it was two years ago.

This fiscal year, net interest payments on debt amounted to $882 billion, averaging around $24 billion per day, accounting for 3.06% of the US GDP, the highest proportion since 1996.

The long-term historical high budget deficit is a key factor leading to the soaring US debt, and the high interest rate environment further exacerbates its deficit.

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