The US national debt has reached yet another record high, surging past $34 trillion for the first time as rising interest rates drive the government’s borrowing costs ever higher. With interest expenses now exceeding what the government spends on defense, the debt burden threatens to weigh down the US economy for decades to come.
Debt Grows by Over $1 Trillion in Just 3 Months
According to the latest Treasury Department figures, total public debt outstanding has climbed by an astonishing $1.046 trillion since the start of the 2023 fiscal year in October. This rapid increase reflects continued high levels of government spending along with rising interest costs on existing debt.
At the current rate, the national debt is projected to top $35 trillion sometime around July. And with another fight looming in Congress over raising the debt ceiling, the politics around America’s debt crisis are heating up once again.
|October 1, 2023
|January 2, 2024
Interest Costs Now Exceed Defense Spending
Amid rising inflation and a series of rapid interest rate hikes by the Federal Reserve, the government’s interest bill has skyrocketed over the past year. According to figures cited by several outlets, annual net interest expenses now total around $950 billion – surpassing the approximately $850 billion spent on national defense.
This represents a dramatic increase from just a few years ago, when interest costs amounted to less than $400 billion annually. And with rates expected to rise further, interest payments threaten to become the single largest category of federal spending going forward.
Expert Warnings About Growing Debt Burden
Economists and budget experts have issued increasingly dire warnings about the exploding national debt, arguing it leaves the US vulnerable to crisis and limits policy options for lawmakers.
“Hitting $34 trillion in debt should be an urgent wake-up call for politicians in Washington,” said Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget. She called on legislators to curb spending in areas like healthcare and to modernize major programs like Social Security and Medicare.
Others argued extraordinary support programs launched during the pandemic need to be scaled back with the economy recovering.
“It is critical we avoid burdening future generations with debts we cannot or will not repay,” said Michael Peterson, CEO of the Peter G. Peterson Foundation. He called for more fiscal responsibility in the years ahead.
Debt Ceiling Debate Looms in Divided Congress
With the national debt swelling rapidly, another polarizing fight in Congress over the debt ceiling lies just months away.
The current suspension of the ceiling expires in July, around when the national debt will again brush up against the statutory limit. Economists have warned that failing to raise the ceiling couldspark an economically catastrophic default.
But Republican lawmakers eager to extract budget concessions and constrain spending are unlikely to grant a clean increase. In the narrowly divided Congress, reaching even a temporary compromise could prove challenging.
The coming battle risks unnerving financial markets and American business interests already worried about growing fiscal imbalances. And with trillion-dollar deficits projected indefinitely, the debt limit fight will replay over and over in the years to come.
Long-Term Consequences for Economy and Society
While US borrowing costs remain relatively low for now thanks to strong demand for dollar-denominated assets, rising debt levels threaten to inflict damage over the longer term.
As interest expenses claim more and more of the federal budget, less funding will remain for other priorities like scientific research, infrastructure investment, education programs and more. This drag on public resources could undermine US competitiveness, productivity growth and living standards.
Rising debt servicing costs may crowd out other federal spending over time:
|Projected 2034 Spending
|Cut to $750 billion
|Scientific & Medical Research
|Cut Over 50%
Moreover, as ever-increasing debt piles up, the risk of an eventual fiscal crisis mounts as well. While such a crisis may still be years away barring an unforeseen shock, the growing debt burden leaves the country increasingly vulnerable.
Few easy or politically feasible solutions exist to put America’s fiscal trajectory on a more sustainable track. But the costs of inaction are growing more ominous with each passing year.
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