File:Interest - Stacked bar chart 2006 - 2007.png

English: Interest on Public Debt and Intragovernmental debt

Explanation

Understanding the interest categories

The following is from the GAO Audit Report of the Bureau of Public Debt's FY 2007 report, cited above: "Interest expense incurred during fiscal year 2007 consists of (1) interest accrued and paid on debt held by the public or credited to accounts holding intragovernmental debt during the fiscal year, (2) interest accrued during the fiscal year, but not yet paid on debt held by the public or credited to accounts holding intragovernmental debt, and (3) net amortization of premiums and discounts. The primary components of interest expense are interest paid on the debt held by the public and interest credited to federal government trust funds and other federal government accounts that hold Treasury securities. The interest paid on the debt held by the public affects the current spending of the federal government and represents the burden in servicing its debt (i.e., payments to outside creditors). Interest credited to federal government trust funds and other federal government accounts, on the other hand, does not result in an immediate outlay of the federal government because one part of the government pays the interest and another part receives it. However, this interest represents a claim on future budgetary resources and hence an obligation on future taxpayers. This interest, when reinvested by the trust funds and other federal government accounts, is included in the programs’ excess funds not currently needed in operations, which are invested in federal securities. During fiscal year 2007, interest expense incurred totaled $433 billion, interest expense on debt held by the public was $239 billion, and $194 billion was interest incurred for intragovernmental debt holdings. As Figure 2 illustrates, total interest expense has increased in fiscal years 2003 through 2007. Average interest rates on principal balances outstanding as of September 30, 2007 and 2006, are disclosed in the Notes to the Schedules of Federal Debt."

Understanding the change in interest from 2008 to 2009

From the 2009 report cited above: "During fiscal year 2009, interest expense incurred totaled $381 billion, interest expense on debt held by the public was $189 billion, and $192 billion was interest incurred for intragovernmental debt holdings. As Figure 2 illustrates, total interest expense has increased from fiscal years 2005 through 2008, but decreased from fiscal year 2008 to fiscal year 2009. Due to the current economic conditions, there has been a significant increase in the demand for government backed securities, which resulted in lower average interest rates and interest expense. For example, the average interest rates on Treasury bills outstanding as of September 30, 2009 and 2008, were 0.3 percent and 1.6 percent, respectively. Average interest rates on principal balances outstanding as of September 30, 2009 and 2008, are disclosed in the Notes to the Schedules of Federal Debt."