Economist Peter Morici explains what the national debt is, why it has grown to more than $34 trillion, and what it means for Americans.
The U.S. national debt is growing at a rapid pace and shows no signs of slowing down, despite growing criticism of massive government spending.
The national debt, which measures what the U.S. owes its creditors, rose to $36,171,181,955,284.36 as of Dec. 3, according to the latest figures released by the Treasury Department. That’s about $83.8 billion more than the previous day.
For comparison, just four decades ago public debt hovered around $907 billion.
The outlook for the federal debt level is bleak, and economists are increasingly alarmed by the rapid pace of spending by Congress and The White House. Payment of interest on government debt for the fiscal yearwhich begins in October, now exceeds spending on Medicare and the defense budget.
EMPLOYMENT DEFICIT DRIVES GOVERNMENT DIGIT TO RECORD LEVEL IN 4 YEARS
The latest findings from the Congressional Budget Office show that the national debt will rise to a staggering $54 trillion over the next decade as a result of an aging population and federal health care spending. Higher interest rates also compound the pain of rising debt.
If this debt materializes, it could jeopardize America’s economic standing in the world.
“America’s financial outlook is more dangerous and dire than ever, threatens our economy and the next generation,” said Michael Peterson, CEO of the Peter G. Peterson Foundation, which advocates for federal deficit reduction. “This is not the future any of us want, and this is no way to run a nation as great as ours. “
LARGE DEFICIT, HIGH INTEREST RATE MAKE FEDERAL RATE LESS SUSTAINABLE
The relentless rise is what prompted Fitch Ratings to issue a an unexpected downgrade of the country’s long-term credit score in mid-2023. The agency cut US debt by one notch, stripping it of its pristine AAA rating in exchange for an AA+ rating. In making the decision, Fitch cited concerns about the country’s deteriorating financial situation and expressed concern about the government’s ability to cope with its mounting debt burden amid sharp political divisions.
“It’s a warning shot to the U.S. government that it needs to right its fiscal ship,” Sean Snaith, an economist at the University of Central Florida, told FOX Business. “You can’t just spend trillions of dollars more every year than you take in and not expect harmful consequences.”
A surge in public debt followed a surge in spending President Biden and Democratic lawmakers.
As of September 2022, Biden has already approved about $4.8 trillion in borrowing, including $1.85 trillion for a COVID relief measure called the America’s Rescue Plan and $370 billion for a bipartisan infrastructure bill, according to Committee for a Responsible Federal Budget (CRFB), a group that advocates for deficit reduction.
US PAYING RECORD AMOUNT OF INTEREST ON ITS DEBT
While that’s about half of the $7.5 trillion that former President Donald Trump added to the deficit during his time in office, it’s far more than the $2.5 trillion approved by Trump at the same point in his term. term.
Biden has repeatedly defended his administration’s spending and boasted of cutting the deficit by $1.7 trillion.
“I might point out in parentheses: In my first two years, I reduced the debt by $1.7 trillion. No president has ever done that,” Biden said recently.
However, this figure refers to reducing the national deficit between fiscal years 2020 and 2022; while the deficit has narrowed over this time period, this is largely because the emergency measures introduced during Pandemic of the coronavirus infection covid-19 ended.
The The White House also tried to blame Republicans for the astronomical increase in debt in recent years.
“This trickle-down debt is overwhelmingly caused by repeated handouts by Republicans to big corporations and wealthy individuals,” Michael Kikukawa, the White House’s assistant press secretary, said in a statement provided to FOX Business after the debt topped $34 trillion.
FOR THE FIRST TIME IN HISTORY, THE US DEPOSIT EXCEEDS 34 TRILLION DOLLARS
Even more worrying is that the surge in interest rates over the past year and a half has made the cost of servicing the national debt more expensive.
This is because interest rates are rising federal government borrowing costs her debt will also increase. In fact, the CRFB projects that interest payments on the national debt will be the fastest growing part of the federal budget over the next three decades.
The US Capitol in Washington, DC (Julia Nichinson/Bloomberg via Getty Images/Getty Images)
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Payments are expected to triple from nearly $475 billion in fiscal 2022 to a staggering $1.4 trillion in 2032. Interest payments are projected to grow to $5.4 trillion by 2053. To put that in perspective, that would be more than the US spends on Social Security, Medicare, Medicaid and all other mandatory and discretionary spending programs.
“It is clear that we are on an unsustainable fiscal path,” said CRFB President Maya McGinnias. “You have to do better.”
While the debt has raised concerns among politicians and budget hawks, how worried should we be about the country’s rapid rate of borrowing?
Experts say that the higher the debt rises, the more the US pays in interest each year. That spending can eclipse important public investments that drive economic growth — areas like education, research and development, and infrastructure.
“A debt-burdened nation will have to invest less in its own future,” said the Peter G. Peterson.
A Pew Research Center poll released in 2023 found that 57% of Americans believe that reducing the budget deficit should be a top priority for the president and Congress — up from just 45% the previous year.
