The national debt wasn’t a big issue this midterm election, but it’s still a big problem

But maybe, just maybe, it’s because most people think the deficit doesn’t really matter. This in spite of the fact that in 2018, according to the U.S. Treasury’s public debt reckoning, we will see “the highest annual debt issuance since $1.586 trillion in 2010, when the U.S. economy was still crawling out of a recession.” But let’s face it, we have been hearing about growing deficits and debt most of our lives, and so far, nothing serious seems to have happened.

Soon we may not be able to pay interest on debt

Whatever the reason for our benign neglect, the now-rapidly growing deficit does matter — and the interest cost of the debt is why it matters. It’s one thing to run in the red. It’s something else entirely to lack the wherewithal to make interest payments, and that’s where we may be heading…

Now, let’s play some number games. Assume that all the Big Five expenditures except for interest costs are held constant. Then suppose the average interest rate paid by the U.S. Treasury for all debt outstanding rises from the September 2018 level of 2.86 percent to the September 2008 level of 4.652 percent. Put another way, what if the interest rate on the debt rose by 62 percent?

It’s time to cut spending now to avoid disaster

If so, America’s debt interest costs would rise from $343 billion to a whopping $555 billion, which is slightly more than current defense spending. To finance a cost equal to that of a second American military, we’d either have to make painful cuts to all the other categories — in the Big Five and beyond — or borrow even more, which would of course mean more total debt and even more interest costs. That’s not a solution at all…

We can’t know when the bite will come, but all it would take is for interest rates, driven by inflation and a stronger world economy, to climb toward levels seen just 10 years ago. The Fed has promised three more rate increases in just the next year. Indeed, the CBO is predicting even higher future rates.

The solution? Start cutting the growth of spending now. The economy is booming. Now’s the time to get serious.