The latest data released by the U.S. Treasury Department shows that the federal government's debt scale has exceeded $31 trillion, which has only been more than eight months since the debt scale exceeded $30 trillion, further approaching the statutory debt ceiling of $31.4 trillion. Against the backdrop of the US government's continuous expansion of fiscal spending and the Federal Reserve's continuous hikes in interest rates, the "wild growth" of US government debt has caused concerns.
Xinhua News Agency Issue and text
Data shows that as of October 3, the balance of outstanding federal government debt in the United States was approximately US$31.1 trillion, of which the public held debts of approximately US$24.3 trillion and intergovernmental debts of approximately US$6.8 trillion, which has greatly exceeded the US$23 trillion in the whole year of last year.
The Peter Peterson Foundation of the United States pointed out that US fiscal spending had already embarked on an unsustainable path before the outbreak of the new crown epidemic. Structural drivers have long existed, and the epidemic has rapidly exacerbated the fiscal challenges in the United States. In order to cope with the new crown epidemic, the government has introduced multiple rounds of fiscal relief measures and relied on issuing bonds to raise funds.
The foundation's CEO Michael Peterson said the continuous accumulation of federal government debt is the result of the repeated "irresponsible" between Congress Democratic and Republican parties on fiscal issues. Over the past few decades, Washington politicians have repeatedly chosen to cut taxes or push for government spending plans rather than considering the future of the United States.
According to statistics from the foundation on the 4th, the $31 trillion debt is more than the total economic scale of China, Japan, Germany and the United Kingdom. If this huge debt is distributed to the American people, it is equivalent to a debt of $236,000 per household and a debt of $93,000 per person. If each American household contributes $1,000 a month, it will take 19 years to pay off all debts.
As the Federal Reserve raises interest rates sharply, the interest cost of federal debt has risen significantly. Peterson said too many people are complacent about the debt path in the United States, partly because interest rates were too low before. As debt and interest rates grow, many hidden concerns about the path to debt growth begin to emerge.
The foundation expects that the U.S. federal government spending on interest rates will increase by $1 trillion in the next 10 years due to rising interest rates.
Maya McGinias, chairman of the Federal Budget Accountability Committee of the United States' independent research organization, pointed out that only five years ago, the total federal government debt reached $20 trillion. Now it’s time to budget responsibly. However, the U.S. government is still borrowing. This year alone, Congress and the White House have approved $1.9 trillion in new loans. Biden has approved a new deficit of $4.9 trillion since taking office. “We are addicted to debt,” McGinias said.
Research report released by the Bipartisan Policy Research Center shows that the federal government hit the then $28.9 trillion debt ceiling at the end of October 2021. Since then, the US Treasury Department has taken unconventional measures to avoid debt defaults until the US Congress passed legislation in December of that year, raising the debt ceiling to $31.4 trillion.
The high and rising debt of the United States not only poses a challenge to the U.S. fiscal policy, but also threatens the future of the U.S. economy.
McGinias pointed out that the United States faces major fiscal challenges in the future. Federal Medicare is only 6 years away from bankruptcy, and social security is only 12 years away from bankruptcy. However, policy makers have not come up with any plans to build a solid financial foundation for both projects.
The long-term impact of federal debt on the U.S. economy cannot be ignored. The U.S. Congressional Budget Office (CBO) released a report earlier this year warning that rising high debt will increase borrowing costs in the private sector, resulting in a decrease in corporate investment and will drag economic growth over time. In addition, the risk of investors losing confidence in the U.S. government's debt repayment ability will increase, which may lead to sudden rise in interest rates, spirals of inflation, or other chaos, and the possibility of a fiscal crisis in the United States will increase.
Peterson said that high debt is related to the future economic health of the United States and intergenerational fairness. The rising huge debt will prevent the United States from better responding to climate change, the next pandemic, and building an inclusive economy.
In addition, economists generally believe that if US debt truly defaults, the consequences will be even more serious and may even trigger an international financial crisis.
Source: Xinhua News Agency
Process Editor: tf028
