U.S. national debt surpasses $37 trillion, according to the Treasury Department's latest report.
The United States' national debt has reached an unprecedented milestone, surpassing $37 trillion as per the latest Treasury Department report. This debt increase is more than twice as fast as the average rate over the last 25 years, according to Michael Peterson, Chair and CEO of the Peter G. Peterson Foundation.
The acceleration of the national debt is primarily due to the multi-year COVID-19 pandemic starting in 2020. The federal government borrowed heavily under both President Donald Trump and President Joe Biden to stabilize the national economy and support a recovery.
The rapid growth of the national debt raises concerns about the sustainability of U.S. fiscal policy, with a debt-to-GDP ratio of over 119%. This high debt level can limit the government's ability to respond to future economic crises or invest in crucial public programs.
High national debt can also lead to lower economic growth if interest payments on the debt consume a larger share of government spending, reducing investments in infrastructure, education, and other growth-promoting sectors.
As the debt grows, so does the risk of higher interest rates to attract investors. This can increase borrowing costs for both the government and the private sector, potentially slowing economic growth. Higher interest rates can also lead to the "crowding out" effect, where government borrowing competes with private sector investment for limited capital, potentially reducing private sector growth.
Repeatedly reaching debt limits and increasing the national debt can lead to downgrades in the U.S. credit rating, further raising borrowing costs and decreasing market confidence in U.S. debt instruments. High debt levels can also lead to market volatility and uncertainty, especially if investors perceive the U.S. as unable to manage its debt effectively.
The growing national debt places a significant financial burden on future generations, who will inherit both the benefits of current spending and the costs of servicing the debt. High debt levels may limit the government's ability to fund social programs and infrastructure, affecting the quality of life for future generations.
Addressing these challenges will require significant policy reforms. The rapid growth of the national debt highlights the need for comprehensive fiscal reforms to reduce the structural budget deficit and ensure sustainable fiscal policies. The political challenges of managing the debt limit and implementing reforms can lead to political instability and further economic uncertainty.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, expresses hope that the latest debt milestone will "wake up policymakers" to the need for action. The U.S. is adding a trillion more to the national debt every 5 months, according to Peterson, underscoring the urgency of addressing this issue.
- The latest Treasury Department report shows that the United States' national debt has surpassed $37 trillion, increasing at a rate more than twice as fast as the average over the last 25 years.
- The federal government has borrowed heavily in response to the COVID-19 pandemic, with debt levels rising under both President Trump and President Biden, potentially leading to a high debt-to-GDP ratio of over 119%.
- High national debt can limit the government's ability to respond to future economic crises, invest in crucial public programs, and may lead to lower economic growth if interest payments consume a larger share of government spending.
- As the debt grows, the risk of higher interest rates increases, which can further raise borrowing costs for both the government and the private sector, potentially slowing economic growth.
- Repeatedly reaching debt limits and increasing the national debt can lead to downgrades in the U.S. credit rating, further raising borrowing costs, decreasing market confidence in U.S. debt instruments, and causing market volatility and uncertainty.
- Addressing these challenges will require significant policy reforms to reduce the structural budget deficit and ensure sustainable fiscal policies. Acknowledging the urgency of the issue, Maya MacGuineas, president of the Committee for a Responsible Federal Budget, hopes that the latest debt milestone will prompt policymakers to take action.
