Economist Peter Morisi breaks down what the national debt is, why it has ballooned 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 how much the United States owes creditors, fell to $35,866,603,223,541.48 as of Nov. 4, according to the latest figures released by the Treasury Department. This was down about $85 billion from the figure reported the previous day.
By comparison, just 40 years ago, the national debt hovered around $907 billion.
The outlook for federal debt levels is bleak, and economists are sounding the alarm over the breakneck pace of spending by Congress and the White House. Interest payments on the government’s debt for the fiscal year that begins in October currently exceed Medicare costs and the defense budget.
Rapidly rising deficit pushes public debt to record high in four years
The national debt will rise to a staggering $54 trillion over the next decade due to an aging population and rising federal health care costs, according to a new study from the Congressional Budget Office. Rising interest rates are also exacerbating the pain of rising debt.
If this debt materializes, it could jeopardize America’s economic standing in the world.
“America’s fiscal outlook is more dangerous and daunting than ever, threatening our economy and future generations,” said Michael Peterson, CEO of the Peter G. Peterson Foundation, which advocates for reducing the federal deficit. “There is,” he said. “This is a future none of us want, and this is no way to run a country as great as ours.”
Large deficits and high interest rates reduce the sustainability of the federal debt
The relentless increase prompted Fitch Ratings to announce a surprise downgrade of the country’s long-term credit score in mid-2023. The agency downgraded U.S. debt by one notch, stripping it of its original AAA rating in exchange for an AA+ rating. In making this decision, Fitch cited alarm over the country’s fiscal deterioration and expressed concern about the government’s ability to cope with a growing debt burden amid sharp political divisions.
“This is a warning that the U.S. government needs to get its finances right,” Sean Snaith, an economist at the University of Central Florida, told FOX Business. “You can’t spend trillions of dollars more than you earn every year and expect negative effects.”
The surge in national debt follows a sharp increase in government spending. president biden And Democrats.
As of September 2022, Biden has already approved approximately $4.8 trillion in borrowing, including a new loan called the American Rescue Plan, according to the Committee for a Responsible Federal Budget (CRFB). It includes $1.85 trillion in coronavirus relief and $370 billion in a bipartisan infrastructure bill. An organization that advocates deficit reduction.
The US is paying record amounts of interest on its national debt
That’s about half of the $7.5 trillion that former President Donald Trump increased the deficit during his time in office, but far more than the $2.5 trillion Trump approved at the same point in his term.
Biden has repeatedly defended his administration’s spending and boasted of cutting the budget deficit by $1.7 trillion.
“Parenthetically, I reduced the debt by $1.7 trillion in my first two years. No president has ever done that,” Biden said recently.
However, this figure refers to the reduction in the national deficit from FY2020 to FY2022. The deficit narrowed during this period, mainly as emergency measures introduced during the COVID-19 pandemic expired.
The White House is also trying to hold Republicans responsible for the astronomical increase in debt in recent years.
“This is trickle-down debt, driven overwhelmingly by repeated Republican contributions that skew toward big business and the wealthy,” White House Press Secretary Michael Kikukawa said after the debt exceeded $34 trillion. he said in a statement provided to FOX Business.
US national debt exceeds $34 trillion for the first time in history
What’s even more concerning is that the sharp rise in interest rates over the past year and a half has made it more expensive to repay government debt.
Because when interest rates rise, federal borrowing costs Debts will also increase. In fact, according to the CRFB, interest payments on the national debt are projected to be the fastest growing part of the federal budget over the next 30 years.
US Capitol Building in Washington DC (Julia Nickinson/Bloomberg via Getty Images/Getty Images)
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Payments are expected to triple from about $475 billion in fiscal year 2022 to a staggering $1.4 trillion in 2032. By 2053, interest payments are expected to soar to $5.4 trillion. To put this into perspective, this would be more than the United States spends on Social Security, Medicare, Medicaid, and all other mandatory and discretionary spending programs.
“We are clearly on an unsustainable fiscal path,” CRFB President Maya McGuineas said. “We need to do better.”
Debt is a cause for concern among politicians and budget hawks, but how worried should we be about the rapid pace at which the country is borrowing?
Experts say the more debt the US has, the more interest it will pay each year. Such spending could undermine vital public investments that drive economic growth in areas such as education, research and development, and infrastructure.
The Peter G. Peterson Foundation said, “Countries that are burdened with debt will be less likely to invest in their futures.”
A Pew Research Center survey released in 2023 found that 57% of Americans think reducing the budget deficit should be a top priority for the president and Congress, up from just 45% the year before. did.
