US National Debt Hits Unprecedented $33T Amid Fiscal Fears
September 19, 2023
The Staggering Increase in America’s National Debt
The latest reports from the Treasury Department highlight a concerning milestone – America’s national debt has breached the $33 trillion mark for the first time. This record figure, accompanied by the impending threat of increased federal spending, has been met with significant concern. If Congress fails to pass a dozen appropriations bills by the end of September or negotiate a short-term continuing resolution to maintain government funding, the U.S. risks facing its first federal shutdown since 2019.
The Proposed Measures
Treasury Secretary Janet Yellen underscores the severity of the situation. “President [Biden] has proposed a series of measures that would reduce our deficits over time while investing in the economy, and this is something we need to do going forward,” she announced. Yellen, intent on diligently overseeing the fiscal path, regularly monitors ‘net interest as a share of GDP’. Despite the surge in interest rates, this metric is maintained at a reasonable level.
The Worrying Debt Indicators
‘Net interest as a share of GDP’ represents the net payments made by the federal government on its debt relative to the U.S. GDP. In 2022, these payments equated to 1.86% of GDP. This is consistent with the historical average from 1960, which lingers just below 2%. However, several disconcerting factors are sounding the fiscal alarm bells. The national deficit for the first 11 months of the latest fiscal year hit a staggering $1.5 trillion, indicating a 61% increase from the same timeframe a year ago. Moreover, the total public household debt has set a new record of $17 trillion in the second quarter, driving the U.S. debt-to-GDP ratio to 120%.
U.S. Debt Situation: A Runaway Train
Analyst John Mason aptly describes the U.S. debt situation as “out of control, with no responsible body of people in the government willing to address it.” in his article, The Fiscal Mess Of U.S. Debt. A magic number or level for when a government’s debt starts affecting its economy does not exist. Remarkably, the U.S. has managed heavier debts than previously thought viable, even leveraging these conditions to remain internationally competitive.
The Partisan Blame Game and Economic Risks
However, the sharp rise in interest rates over the past 18 months has made the cost of servicing national debt increasingly burdensome. This presents significant risks to both fiscal and economic outlook. The current political landscape, teeming with extreme partisanship, has ensnared both parties in a blame game, continually delaying problem resolution. Republicans highlight the excessive federal spending programs implemented during the Biden administration, citing examples like the Infrastructure Investment and Jobs Act, the CHIPS and Science Act, and the Inflation Reduction Act. Democrats, in response, emphasize the “trillions spent on Republican tax cuts skewed to the wealthy and big corporations.”