A photo shows the bronze seal hanging next to the door of the U.S. Treasury Department building in Washington, U.S., on January 20, 2023.
Kevin Lamarque | Reuters
The U.S. Treasury Department said Thursday that for the first time this year, the government has spent more than $1 trillion making interest payments on the nation’s $35.3 trillion debt.
The government spent $1.49 trillion to repay debt, up 30% from a year earlier and part of a projected full-year payment of $1.158 trillion, as the Federal Reserve kept its benchmark interest rate at its highest in 23 years.
After subtracting the interest the government earned on its investments, net interest payments were $843 billion, higher than any other sector except Social Security and Medicare.
The surge in debt-servicing costs comes as the U.S. budget deficit soared in August, approaching $2 trillion for the full year.
With one month left in the federal government’s fiscal year, the August deficit jumped to $380 billion, a dramatic reversal from a year-ago surplus of $89 billion that was driven primarily by accounting manipulation related to student loan forgiveness.
That brings the deficit to just under $1.9 trillion in 2024, up 24% from the same period a year ago.
The Fed is widely expected to cut interest rates by a quarter of a percentage point next week, but further cuts are expected in the coming months, sending Treasury yields plummeting in recent weeks.
benchmark 10-Year Bond The most recent yield was around 3.7%, down more than a quarter of a percentage point since early July.
