The United States’ national debt has soared to record highs of $34 trillion. This historic peak in debt, as reported by the Treasury Department, marks a turning point in the nation’s financial health. [Source]
Just four decades ago, the national debt hovered around a comparatively modest $907 billion, reflecting the rapid escalation of government borrowing in recent years.
Michael Peterson, CEO of the Peter G. Peterson Foundation, a vocal advocate for fiscal sustainability, expressed concern: “We are beginning a new year, but our national debt remains on the same damaging and unsustainable path.”
This milestone comes as Congress grapples with finalizing essential funding bills to avert a government shutdown.
Projections by the Congressional Budget Office are grim, forecasting the national debt to nearly double over the next three decades. By 2053, the debt is expected to skyrocket to 181% of the gross domestic product (GDP), surpassing all previous levels.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, describes the risk: “Though our level of debt is dangerous for both our economy and for national security, America just cannot stop borrowing.”
The White House has attributed the surge in federal debt to Republican policies, branding it as “trickle-down debt” driven by tax cuts and benefits favoring corporations and the wealthy. While the White House continues to criticize these policies, Bidenomics are certainly at fault.
The recent increase in interest rates has added to the burden, with projections indicating that interest payments on the national debt will be the fastest-growing segment of the federal budget for the next three decades. These payments are expected to triple from $475 billion in 2022 to a staggering $1.4 trillion in 2032, eventually reaching $5.4 trillion by 2053, surpassing expenditures on major programs like Social Security, Medicare, and Medicaid.
The gross national debt’s rapid growth, earlier than pre-pandemic projections, was fueled by government borrowing during the Biden administrations to stabilize and recover the economy amidst the pandemic. This borrowing, coupled with inflation, has escalated the cost of servicing the debt.
Republicans propose cutting non-defense government programs and clean energy initiatives while opposing increased IRS funding and further tax cuts. [Source]
While the debt has not immediately burdened the U.S. economy, thanks to willing investors, the long-term trajectory poses risks to national security and key social programs. The government’s ability to maintain investor confidence is crucial, especially in light of foreign buyers like China and Japan reducing their holdings of U.S. Treasury notes.
For the average American, this translates to an approximate debt of $100,000 per person, a figure that, while not currently hindering economic growth, could lead to long-term challenges. Higher debt levels may pressure inflation and keep interest rates elevated, further increasing the cost of repaying the national debt.
Congress faces a tight deadline to finalize new department budgets, following the passage of a temporary spending bill by the House and Senate in November, which successfully prevented a government shutdown.