Earlier this week, Allen Quist won the Republican primary to challenge DFL Rep. Tim Walz in this year's general election.
In an interview with MPR News, Quist said that tackling the federal deficit would be his top priority as a member of Congress. To underscore just how bad things have become, Quist pointed out that more and more taxpayer dollars are going to pay interest on federal debt.
"This year 20 cents out of every dollar the government is collecting is going for interest. If that trend continues, that's going to 25 cents out of every dollar, in four years 30 cents out of every dollar," Quist said. "We can't do this. We don't have any options. We absolutely have to get our finances under control."
Quist's accounting overstates the problem.
Here's how Quist is coming up with his numbers.
In fiscal year 2011, the federal government brought in about $2.228 trillion according to the Congressional Budget Office. The same year, the federal government paid about $454 billion in interest on all its outstanding debt, according to the Treasury Department.
By that measure, Quist is correct. While the Treasury Department doesn't project the interest it will owe on all its outstanding debt into the future, to support the rest of his claim, Quist assumed a 3.1 percent interest rate in fiscal year 2014 and a 4.5 percent interest rate in fiscal year 2016.
But when economists are talking about interest on the nation's debt, they don't include interest on all of the government's outstanding debt, which includes various trust funds, explained J.D. Foster, an economist with the conservative Heritage Foundation.
"It is interest the federal government pays to itself. It's an accounting exchange," Foster said. "It's as though you had two different accounts and one account lent money to the other and you recorded the interest paid by the account that borrowed the money as part of your total interest expense for the year. It wouldn't make much sense."
"The correct number to look at is interest on the publically held debt," because it's debt that the government has sold to the public, Foster said.
That changes Quist's claim dramatically.
For fiscal year 2011, roughly 10 cents of every tax dollar went to paying interest on publicly held debt. In fiscal year 2014, it would come to about 9 cents of every dollar, and in fiscal year 2016, it would be upwards of 13 cents of every dollar, according to the White House's latest fiscal projections. Those numbers would change if the government decides to let the Bush-era tax cuts expire.
Quist uses legitimate numbers to come up with his claim. And it's true the federal government's debt continues to grow, and requires higher interest payments as a result.
But Quist overstates the problem by using an interest figure that economists tend not to account for because it mixes interest the government owes itself and interest it owes on publicly held debt.
As a result, Quist's claim misleads.
MPR News, The Daily Circuit, Minn. 1st and 8th Congressional District candidates on primary win, Aug. 15, 2012
The Treasury Department, Interest Expense on the Debt Outstanding, accessed Aug. 16, 2012
The Treasury Department, Frequently Asked Questions about the Public Debt, accessed Aug. 16, 2012
The Congressional Budget Office, Budget and Economic Outlook: Fiscal Years 2011 to 2021, January 26, 2011
The White House Office of Management and Budget, FY 2013 Mid-Session Review, Table S-4, July 27, 2012
The Concord Coalition, Projected Interest Costs on Debt Held By the Public, accessed Aug. 16, 2012
The Heritage Foundation, Interest on the Debt Exceeds Spending for Many Programs, accessed Aug. 16, 2012
Interview, Allen Quist, Aug. 16, 2012
Interview, J.D. Foster, economist, The Heritage Foundation, Aug. 16, 2012
Interview, Josh Gordon, policy director, the Concord Coalition, Aug. 16, 2012