Markets
Puerto Rico’s Debts Are “Not Payable” According to Governor
Puerto Rico’s Debts Are “Not Payable” According to Governor
The global economy has been walking a tightrope for some time. Zero interest-rate policies, slow economic growth, and mounting debt means zero room for error.
Puerto Rico is the latest jurisdiction to toss in the towel, with Governor Alejandro Garcia Padilla warning that the island is perilously close to falling into a “death spiral”.
“The debt is not payable… there is no other option. This is not politics, this is math,” Garcia Padilla told the New York Times. “But we have to make the economy grow. If not, we will be in a death spiral.”
Puerto Rico, as you can see in the above chart published by the WSJ, has been in a tricky situation for some time. It’s $72 billion of debt for an island of roughly 3.5 million is equal to 70% of economic output. This is a ratio that is at least three times higher than the next highest state or territory in the United States.
The territory, which was ceded to the United States after the Spanish-American War, has been in trouble for awhile. The population growth rate has slowed, emigration is at record levels, and per-capita GDP has dropped over the last decade. Puerto Rico has relied on debt to try to grow the economy, and now credit-rating companies expect the first default to occur this week from the island’s electricity provider, which borrowed $9 billion. Further, the territory has been issuing new debt to pay old debt, and now the government is expected to run out of cash in July.
The Puerto Rico scenario encapsulates the current challenge that the rest of the world faces. Central Banks have pulled out all the stops to try to get growth: QE, increased borrowing, ZIRP, and ongoing currency wars. However, if that growth doesn’t come at the rate needed to get the ball rolling, it makes the debt harder to service. The more leverage, the higher the stakes are. Then all that is needed is one catalyst and things can get ugly fast.
Speaking of defaults: here’s what will happen if Greece defaults, and here is a breakdown of their debt.
Markets
U.S. Debt Interest Payments Reach $1 Trillion
U.S. debt interest payments have surged past the $1 trillion dollar mark, amid high interest rates and an ever-expanding debt burden.
U.S. Debt Interest Payments Reach $1 Trillion
This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.
The cost of paying for America’s national debt crossed the $1 trillion dollar mark in 2023, driven by high interest rates and a record $34 trillion mountain of debt.
Over the last decade, U.S. debt interest payments have more than doubled amid vast government spending during the pandemic crisis. As debt payments continue to soar, the Congressional Budget Office (CBO) reported that debt servicing costs surpassed defense spending for the first time ever this year.
This graphic shows the sharp rise in U.S. debt payments, based on data from the Federal Reserve.
A $1 Trillion Interest Bill, and Growing
Below, we show how U.S. debt interest payments have risen at a faster pace than at another time in modern history:
Date | Interest Payments | U.S. National Debt |
---|---|---|
2023 | $1.0T | $34.0T |
2022 | $830B | $31.4T |
2021 | $612B | $29.6T |
2020 | $518B | $27.7T |
2019 | $564B | $23.2T |
2018 | $571B | $22.0T |
2017 | $493B | $20.5T |
2016 | $460B | $20.0T |
2015 | $435B | $18.9T |
2014 | $442B | $18.1T |
2013 | $425B | $17.2T |
2012 | $417B | $16.4T |
2011 | $433B | $15.2T |
2010 | $400B | $14.0T |
2009 | $354B | $12.3T |
2008 | $380B | $10.7T |
2007 | $414B | $9.2T |
2006 | $387B | $8.7T |
2005 | $355B | $8.2T |
2004 | $318B | $7.6T |
2003 | $294B | $7.0T |
2002 | $298B | $6.4T |
2001 | $318B | $5.9T |
2000 | $353B | $5.7T |
1999 | $353B | $5.8T |
1998 | $360B | $5.6T |
1997 | $368B | $5.5T |
1996 | $362B | $5.3T |
1995 | $357B | $5.0T |
1994 | $334B | $4.8T |
1993 | $311B | $4.5T |
1992 | $306B | $4.2T |
1991 | $308B | $3.8T |
1990 | $298B | $3.4T |
1989 | $275B | $3.0T |
1988 | $254B | $2.7T |
1987 | $240B | $2.4T |
1986 | $225B | $2.2T |
1985 | $219B | $1.9T |
1984 | $205B | $1.7T |
1983 | $176B | $1.4T |
1982 | $157B | $1.2T |
1981 | $142B | $1.0T |
1980 | $113B | $930.2B |
1979 | $96B | $845.1B |
1978 | $84B | $789.2B |
1977 | $69B | $718.9B |
1976 | $61B | $653.5B |
1975 | $55B | $576.6B |
1974 | $50B | $492.7B |
1973 | $45B | $469.1B |
1972 | $39B | $448.5B |
1971 | $36B | $424.1B |
1970 | $35B | $389.2B |
1969 | $30B | $368.2B |
1968 | $25B | $358.0B |
1967 | $23B | $344.7B |
1966 | $21B | $329.3B |
Interest payments represent seasonally adjusted annual rate at the end of Q4.
At current rates, the U.S. national debt is growing by a remarkable $1 trillion about every 100 days, equal to roughly $3.6 trillion per year.
As the national debt has ballooned, debt payments even exceeded Medicaid outlays in 2023—one of the government’s largest expenditures. On average, the U.S. spent more than $2 billion per day on interest costs last year. Going further, the U.S. government is projected to spend a historic $12.4 trillion on interest payments over the next decade, averaging about $37,100 per American.
Exacerbating matters is that the U.S. is running a steep deficit, which stood at $1.1 trillion for the first six months of fiscal 2024. This has accelerated due to the 43% increase in debt servicing costs along with a $31 billion dollar increase in defense spending from a year earlier. Additionally, a $30 billion increase in funding for the Federal Deposit Insurance Corporation in light of the regional banking crisis last year was a major contributor to the deficit increase.
Overall, the CBO forecasts that roughly 75% of the federal deficit’s increase will be due to interest costs by 2034.
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