Interest on national debt threatens to overtake spending on domestic programs

February 02, 1992|By Stephen E. Nordlinger | Stephen E. Nordlinger,Washington Bureau of The Sun

WASHINGTON -- Interest payments on the mushrooming national debt are growing so fast that this major outlay is almost eclipsing the amount Congress appropriates each year for all domestic programs, new government figures show.

The government paid $194.5 billion in interest payments last year on its debt, just a shy less than the $195.4 billion spent on these domestic programs, which range from education aid and work training to low-income energy assistance, prison operations, housing subsidies, the customs service and space stations.

This year, interest costs will reach almost $200 billion, close to the $216 billion allocated by Capitol Hill for these widespread domestic programs, according to the administration's budget documents.

Americans, especially the poor who depend on federal services, pay a heavy price for these rapidly rising interest costs, which mounted as the government built up huge budget deficits in the 1980's.

Interest payments, which go to many upper-income people, divert funds from the problems of hard-pressed Americans, which have become critical in the recession.

"The burden of interest [represents] money siphoned from current needs to meet the bills of the past," the Congressional Budget Office said in its recent report on the 1993-1997 budgets.

Under the law, the government must meet the interest payments on its borrowed funds.

But an agreement between the White House and Congress in 1990 imposed a strict ceiling on domestic programs that may not be lifted for two more years unless Democrats persuade President Bush to break the accord.

With the administration intent on continuing to keep a tight rein on domestic spending, interest payments on the federal debt are expected even to top appropriations by Congress for domestic programs by the 1996 budget, according to documents released last week by the Office of Management and Budget.

At that point, interest payments are predicted to reach $253 billion while domestic spending from congressional outlays will be at $237 billion.

The interest, paid on the nation's debt, parallels the piling up of annual deficits. This debt has risen from $709 billion in 1980 to $1.5 trillion in 1985 and $2.7 trillion at the end of last year.

It is headed toward $4.2 trillion by 1997, reflecting a projected total of $1.5 trillion in deficits, unless stringent measures are taken to cut spending and raise taxes, according to the CBO. Not since World War II has the debt been as large in relation to the economy.

"Although the recession has made further deficit reduction inadvisable this year, the deficit should return to the top of the political agenda in 1993," Robert D. Reischauer, the CBO director, told the Senate Budget Committee two weeks ago.

Interest payments are rising rapidly because they cover borrowing for the entire federal budget not just so-called discretionary domestic spending which derives from congressional appropriations.

As a result of the steep cuts during the Reagan administration, this part of domestic spending accounts this year for only about 15 percent of the budget.

But the government must borrow to make up revenue shortfalls to cover military costs as well, which comprised 20 percent of the budget this year.

Overall, however, the escalating budget deficit stems largely from the skyrocketing cost of the so-called "mandatory programs," especially Medicare and Medicaid, which provide benefits to all those eligible.

No separate appropriations are required.

The sharp rise in health costs has been the chief force causing these mandatory programs to reach almost half the budget.

The administration is pressing Congress in its new budget to put a ceiling on these costs so they are now longer exempt from budgetary discipline. The ceiling would allow for increases based on population and overall rate of inflation.

Richard G. Darman, the budget director, warned the House Budget Committee last week that only by controlling these mandatory costs "can we hope to bring down the deficit other than by stronger economic growth."

But these are popular programs not easily curbed so the prospect of relief on interest payments remains remote.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.