The U.S. defense spending could be drastically affected by the rising debt of America, as reported by the Capital Group; an American financial service firm.
This was revealed by the Capital Group's US asset economist Darrell Spence in a research note he released last week. Here is the alarming analysis he shared.
US Defense Spending Could Suffer Because of America's Rising Debt
Business Insider reported that the debt of the United States is growing as days go by. The Capital Group warned that this debt trend could affect the defense funds of America because the U.S. needs to focus on paying interests instead.
"US debt dynamics are evolving in a way that requires attention. Over the next five years, net interest payments on the debt are expected to surpass defense spending," said Spence via his official research note.
He explained that if the largest economic debt in the world rises at the rate expected by the Congressional Budget Office, the net interest payments of the U.S. government could increase from $500 billion to over $1 trillion by 2033.
Spence explained that if this happens, the interest payments will consume an additional 10.6% of federal government revenue during the said period.
This debt analysis of Darrell Spence could raise alarms among U.S. policymakers and other American officials, especially during the ongoing Israel-Hamas and Ukraine-Russia wars.
Despite criticisms, U.S. President Joe Biden recently urged Congress to release over $100 billion so that Ukraine and Israel can receive the financial assistance they need.
Read also: US Special Forces Security Breach: White House Apologizes for Revealing Faces in Photo with Biden
Consequences of US Rising Debt
The rising U.S. debt could lead to numerous consequences. For example, ever-rising debt levels could force the federal government to implement tough policies, which could negatively impact residents, companies, and industries.
Aside from this, here are other negative effects posed by America's rising debt:
- Structurally higher interest rates
- Higher taxes
- Slower economic growth
- Lower stock market returns
If you want to learn more details about Spence's latest analysis of the worsening U.S. debt levels, you can click this link.
