America's Looming National Debt Crunch Could Spell Disaster for the World

The swelling national debt number, edging closer to the 31.4-trillion-dollar statutory ceiling the U.S. Congress placed on the government’s borrowing ability, has raised concerns about U.S. fiscal sustainability and its negative spillover effects on global financial markets.

BEIJING, Oct. 11 (Xinhua) — More than 33 years ago, a billboard-sized running total display was installed a block away from Times Square in New York City to remind passersby how much money the U.S. federal government has borrowed from the public and has yet to pay back.

However, this tally, well-known as the National Debt Clock, did not seem to bother successive U.S. governments, including the current administration. It read 31.1 trillion U.S. dollars for the first time on Oct. 3, and is still ticking away madly.

The swelling national debt number, edging closer to the 31.4-trillion-dollar statutory ceiling the U.S. Congress placed on the government’s borrowing ability, has raised concerns about U.S. fiscal sustainability and its negative spillover effects on global financial markets.

DISGRACEFUL RECORD

The total public debt outstanding reached 31.1 trillion dollars on Oct. 3, including 24.3 trillion dollars in debt held by the public and 6.8 trillion in intergovernmental holdings, said the U.S. Treasury Department’s daily treasury statement released on Oct. 4.

In fact, real-time data released by the official website of the National Debt Clock showed that the debt number, having so far well surpassed 31.1 trillion, amounts to more than 93,400 dollars of debt per American citizen, and nearly 250,000 dollars of debt per taxpayer.

Given the new record, the ratio of the U.S. federal debt to the GDP has risen to roughly 126 percent, the data showed.

An estimate by British financial media outlet Finbold showed that in 2022 alone, the U.S. national debt grows by almost 6 billion dollars every day.

The number is more than the value of the economies of China, Japan, Germany and Britain combined, the Peter G. Peterson Foundation (PGPF) noted in an article published last week.

If every U.S. household paid 1,000 dollars a month, it would still take 19 years for the debt to be paid off, noted the article.

“This is a new record no one should be proud of,” said Maya MacGuineas, president of budget watch group the Committee for a Responsible Federal Budget.

About eight months ago, the total U.S. public debt outstanding exceeded 30 trillion dollars, hitting a fiscal milestone. In an attempt to avert a looming debt default, the U.S. Congress passed legislation in December to raise the debt limit to the current 31.4 trillion dollars. The hike, however, failed to stop the U.S. national debt from reaching nosebleed levels.

“While much of that new borrowing was necessary to combat COVID, we are now past the most severe challenges of the pandemic, and it is time to budget responsibly — yet we are still borrowing,” MacGuineas said.

DEBT ADDICT

“The coronavirus pandemic rapidly accelerated our fiscal challenges, but we were already on an unsustainable path, with structural drivers that existed long before the pandemic,” the PGPF said.

As the foundation noted, the United States has enjoyed a borrowing binge over the past decades, with its gross debt increasing from 3.2 trillion dollars in 1990 to 5.62 trillion in 2000, and then to 13.56 trillion in 2010. The country’s gross debt hit 27.72 trillion dollars in 2020, and surpassed 30 trillion dollars in late January.

A significant share of the overall federal spending went to the U.S. national defense budget. An article released by the PGPF in early May showed the U.S. defense spending accounted for more than 10 percent of all federal spending, and has remained No. 1 in the world for years.

Up to Us, a U.S. non-profit aimed at creating national debt awareness on college campuses, noted in an article published in 2020 that the country’s national debt hit the 1 trillion mark for the first time in history by 1982 after the Vietnam War and the Cold War.

“By the 21st century, the national debt got to 20 trillion dollars after major events such as the War on Terror,” it said.

Adding to the federal government’s big spending on endless wars are its massive stimulus packages, rounds of tax cuts as well as the U.S. Federal Reserve’s sudden reversal of its monetary strategy from a years-long “quantitative easing” policy to a tighter one, which, noted the U.S. Bank National Association in an article in late September, “will likely result in weakening the job market as businesses slow activity in the wake of higher borrowing costs.”

In December 2020, then U.S. President Donald Trump signed off a 2.3-trillion-dollar spending package. In 2022 alone, the U.S. Congress and President Joe Biden have approved a combined 1.9 trillion dollars in new borrowing, and Biden has approved 4.9 trillion dollars in new deficits since taking office.

To prevent the government from defaulting on its legal obligations, the U.S. Congress has acted 78 separate times to permanently raise, temporarily extend, or revise the definition of the debt limit ever since 1960, noted the Treasury Department.

“We are addicted to debt,” said MacGuineas, adding that for decades, U.S. lawmakers have chosen to “pass politically easy policies” rather than face the challenges of true governing.

“Basically, Washington has engaged in a long-term debt spree,” said a New York Times article published on Oct. 4.

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