Question

Debt has a certain self-reinforcing quality to it. There is one category of government spending that automatically increases along with the federal debt. What is it?

Short answer

The category of government spending that automatically increases along with the federal debt is the interest on federal debt. This spending category has a self-reinforcing quality, as the higher the debt, the higher the interest payment, ultimately leading to further growth in the debt.

Step-by-step solution

Identify the federal debt

Federal debt is the total amount of money that the government of a country owes to its creditors, usually in the form of government bonds and other securities. As the government spends more than its revenue through taxes and other sources, it needs to borrow money to cover the shortfall, which in turn increases the federal debt.

Understand government spending categories

Government spending is mainly divided into three categories: mandatory spending, discretionary spending, and interest on federal debt. 1. Mandatory spending: This includes expenses that are required by law, such as Social Security, Medicare, and Medicaid. These programs are funded automatically, based on the number of eligible recipients and their benefit levels. 2. Discretionary spending: This includes expenses that are decided upon by the government through the annual budget process. Examples include defense, education, and research. 3. Interest on federal debt: This is the interest that the government must pay to its creditors for borrowing money. It must be paid before any other spending can take place.

Identify the self-reinforcing spending category

As the federal debt grows, the interest on that debt also increases. This is because the government must pay interest on its outstanding debt, and as the debt increases, so does the interest payment. In turn, the interest payment becomes a larger portion of government spending. So, the category of government spending that automatically increases along with the federal debt is \( \boxed{\text{interest on federal debt}} \). This spending category has a self-reinforcing quality, as the higher the debt, the higher the interest payment, ultimately leading to further growth in the debt.