Prof. ST Hsieh
Director, US-China Energy Industry Forum
January 3, 2024
The US is the largest economy in the world, and it is also the most powerful nation in the world. But in the background, the US public debt tops US$34 Trillion as of today and it tops the world. More importantly, the US national debt will keep rising in the foreseeable future, there is no real expectation that the US government will be able to control deficit spending and shrink the debt load.
The US faces unprecedented challenges including a polarized politics and a bitterly divided society. These challenges are the most important reason for this rising debt. Because politicians are busy holding their bottom lines without the courage to deal with any real issue. The US public is numbed by this huge debt and loses any real sense or feeling about the potential disastrous consequences that will force upon the people. But time is running out fast, once the nation falls off this debt cliff, there is no chance for any recovery. Some experts think the “deadline” is only about 20 years away from today.
US debt will have to be covered by future generations, hopefully before the “deadline” so they have a chance for a recovery. Further, the world must be prepared: if the US were to default, there will be a unprecedented global contraction.
UPDATE 2-US public debt tops $34 trillion as Congress heads into funding fight
Updated Tue, January 2, 2024 at 6:17 PM PST·2 min read
WASHINGTON, Jan 2 (Reuters) – The U.S. federal government’s total public debt has reached $34 trillion for the first time, the U.S. Treasury Department reported on Tuesday, as members of Congress gear up for another series of federal funding battles in the coming weeks.
The Daily Treasury Statement for Friday showed that the total public debt outstanding rose to $34.001 trillion from $33.911 on Thursday.
The debt that counts toward the federal debt ceiling rose to $33.89 trillion on Friday from $33.794 trillion on Thursday. This “debt subject to limit” category excludes the unamortized discount on Treasury bills and zero coupon bonds, debt issued by the Federal Financing Bank and guaranteed debt of certain other agencies.
The milestone comes shortly after the federal debt topped $33 trillion in September amid rising federal deficits fueled by falling tax revenues and rising federal expenditures.
Congress returns to Washington next week to tackle Jan. 19 and Feb. 2 deadlines for settling government spending through September, amid Republican demands to reduce fiscal 2024 discretionary spending below caps agreed in June. Lawmakers also hope to pass emergency aid for Ukraine and Israel, possibly with unrelated U.S. border security provisions attached.
But reaching a compromise could become more difficult with November presidential and congressional elections coming quickly into focus.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a fiscal watchdog group, called the $34 trillion federal debt figure “a truly depressing chievement,” attributing it to political leaders’ unwillingness to make difficult fiscal choices.
“We remain hopeful that policymakers will take further measures to reduce our borrowing either by raising taxes, reducing spending, or creating a fiscal commission – or ideally by doing all of the above,” MacGuineas said in a statement.
White House spokesperson Michael Kikukawa said the debt increases were “trickle-down debt” driven by Republican-passed tax cuts in 2017 that benefited corporations and wealthy Americans.
He added that Biden plans to reduce U.S. deficits by $2.5 trillion over 10 years by increasing taxes on large corporations and wealthy Americans and cutting spending on pharmaceuticals and tax breaks for oil companies. (Reporting by David Lawder; Editing by Andrea Ricci, Sandra Maler and Muralikumar Anantharaman)
US national debt hits record $34 trillion as Congress gears up for funding fight
FATIMA HUSSEIN and JOSH BOAK
Updated Tue, January 2, 2024 at 4:21 PM PST
WASHINGTON (AP) — The federal government’s gross national debt has surpassed $34 trillion, a record high that foreshadows the coming political and economic challenges to improve America’s balance sheet in the coming years.
The U.S. Treasury Department issued a report Tuesday logging U.S. finances, which have become a source of tension in a politically divided Washington that could possibly see parts of the government shutdown without an annual budget in place.
HOW DID THE NATIONAL DEBT HIT $34 TRILLION?
The national debt eclipsed $34 trillion several years sooner than pre-pandemic projections. The Congressional Budget Office’s January 2020 projections had gross federal debt eclipsing $34 trillion in fiscal year 2029.
The government borrowed heavily under then President Donald Trump and current President Joe Biden to stabilize the economy and support a recovery. But the rebound came with a surge of inflation that pushed up interest rates and made it more expensive for the government to service its debts.
“So far, Washington has been spending money as if we had unlimited resources,” said Sung Won Sohn, an economics professor at Loyola Marymount University. “But the bottom line is there is no free lunch,” he said, “and I think the outlook is pretty grim.”
The gross debt includes money that the government owes itself, so most policymakers rely on the total debt held by the public in assessing the government’s finances. This lower figure — $26.9 trillion — is roughly equal in size to the U.S. gross domestic product.
WHAT IS THE IMPACT TO THE ECONOMY?
The national debt does not appear to be a weight on the U.S. economy right now, as investors are willing to lend the federal government money. This lending allows the government to keep spending on programs without having to raise taxes.
But the debt’s path in the decades to come might put at risk national security and major programs, including Social Security and Medicare, which have become the most prominent drivers of forecasted government spending over the next few decades. Government dysfunction, such as another debt limit showdown, could also be a financial risk if investors worry about lawmakers’ willingness to repay the U.S. debt.
Foreign buyers of U.S. debt — like China, Japan, South Korea and European nations — have already cut down on their holdings of Treasury notes.
A Peterson Foundation analysis states that foreign holdings of U.S. debt peaked at 49 percent in 2011, but dropped to 30 percent by the end of 2022.
“Looking ahead, debt will continue to skyrocket as the Treasury expects to borrow nearly $1 trillion more by the end of March,” said Peterson Foundation CEO Michael Peterson. “Adding trillion after trillion in debt, year after year, should be a flashing red warning sign to any policymaker who cares about the future of our country.
HOW COULD IT AFFECT ME?
The debt equates to about $100,000 per person in the U.S. That sounds like a lot, but the sum so far has not appeared to threaten U.S. economic growth.
And as the debt challenge evolves over time, choices may become more severe as the costs of Social Security, Medicare and Medicaid increasingly outstrip tax revenues.
When it could turn into a more dire situation, is anyone’s guess, says Shai Akabas, director of economic policy at the Bipartisan Policy Center, “but if and when that happens, it could mean very significant consequences that occur very quickly.”
HOW DO REPUBLICANS AND DEMOCRATS DIFFER?
Both Democrats and Republicans have called for debt reduction, but they disagree on the appropriate means of doing so.
The Biden administration has been pushing for tax hikes on the wealthy and corporations to reduce budget deficits, in addition to funding its domestic agenda. Biden also increased the budget for the IRS, so that it can collect unpaid taxes and possibly reduce the debt by hundreds of billions of dollars over 10 years.
Republican lawmakers have called for large cuts to non-defense government programs and the repeal of clean energy tax credits and spending passed in the Inflation Reduction Act. But Republicans also want to trim Biden’s IRS funding and cut taxes further, both of which could cause the debt to worsen.
Both claims are previews of cases that will likely be put to voters in this year’s presidential election.
America Has Borrowed $1 Trillion Since the Start of Football Season
Wed, January 3, 2024 at 11:40 AM PST·
Here’s how fast the federal government is borrowing piles of money: when the national debt hit $33 trillion in mid-September, the current National Football League (NFL) season was already two weeks old.
You don’t have to be a fan of sports to know that football season in America isn’t particularly long—excluding the playoffs, teams play 17 games over the span of 18 weeks. The final games of the season are scheduled to be played this upcoming weekend, a few days after the national debt officially surpassed a new threshold: $34 trillion, according to an announcement made Wednesday morning by the Treasury Department.
“Looking ahead, debt will continue to skyrocket as the Treasury expects to borrow nearly $1 trillion more by the end of March,” said Michael A. Peterson, CEO of the Peter G. Peterson Foundation, in a statement.”
Indeed, it’s astounding how quickly the federal government is piling up new debt. Equally remarkable is how much sooner it has hit some of these thresholds compared to the expected trajectories before the COVID-19 pandemic.
Since then, the debt has grown faster due to the unprecedented levels of fiscal stimulus unleashed during the pandemic and because baseline federal spending has failed to return to pre-pandemic levels. In the fiscal year that ended in September, the federal government spent $6.1 trillion, up from $4.4 trillion in fiscal year 2019 (the last one before the pandemic). Federal revenue has climbed in recent years as well—$4.4 trillion last year, up from $3.5 trillion in 2019—but those increases haven’t been large enough to keep up with the surge in new spending.
“Though our level of debt is dangerous for both our economy and for national security, America just cannot stop borrowing,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a nonprofit that advocates for lower deficits, in a statement. “This is a moment of consequence and continuing to refuse to pay our own bills will not lead us to where we need to be as a nation.”
The debt is likely to become an even bigger story in the new year: “The Debt Matters Again,” proclaimed The New York Times this week, noting that economists who spent the past decade downplaying concerns about the debt are now getting more worried because of how higher interest rates have made borrowing more expensive.
That’s a nasty feedback loop—one that Reason and others have been warning about for years—that means the federal government will have to borrow more money in future years to afford the payments on the money it has already borrowed. The Peterson Foundation estimates that the government spends about $2 billion per day just to service the cost of existing debt.
Until lawmakers make some serious changes to fiscal policy, expect these announcements to keep coming with greater frequency—at least for a little while. The United States has about 20 years until “no amount of future tax increases or spending cuts could avoid the government defaulting on its debt,” economists at the University of Pennsylvania warned in October.
One of the things that makes professional football so compelling is the urgency that comes with each week. With so few games on the schedule, each one is seemingly the most important of the year, and even a single loss early in the season can have a significant impact on a team’s long-term aspirations.
Congress would do well to embrace that same sense of urgency when it comes to the country’s fiscal status, which is a game no one should want to lose.
The US national debt hits a new all-time high of $34 trillion
The dramatic rise in federal debt is expected to play a huge role in discussions about the 2017 GOP tax cut under former President Donald Trump, as several provisions from that law are scheduled to expire in 2025. File Photo by John Angelillo/UPI
Jan. 3 (UPI) — The U.S. national debt surpassed $34 trillion this week and continues to rise at a record pace under persistent annual deficits, according to the Treasury Department.
The nation added a staggering $1 trillion in debt in just the last three months, with budget negotiations stalled on Capitol Hill as lawmakers continue to tangle over how to keep the government fully funded and, at the same time, deflate the ballooning federal deficit.
Lawmakers return to Washington next week from the holiday break just as federal spending laws are set to expire on Jan. 19 and Feb. 2, which would shut down the government at least partially if Congress fails to pass funding extensions.
The U.S. Senate passed legislation in June that suspended the debt limit and imposed new spending caps, allowing the United States to avoid defaulting on its debt for the first time.
The dramatic rise in federal debt is expected to play a huge role in discussions about the 2017 GOP tax cut under former President Donald Trump, as several provisions from that law are scheduled to expire in 2025.
Meanwhile, the government is paying more to borrow money after the Federal Reserve raised interest rates over the past year to bring down inflation.
At the same time, the government is still spending more than it did before the COVID-19 pandemic, and the money collected from taxes went down last year — raising even more serious concerns about the nation’s financial health.
In a statement, Maya MacGuineas, president of the non-profit Committee for a Responsible Federal Budget, which monitors the government’s fiscal health, characterized $34 trillion in debt as a “truly depressing achievement.”
“Though our level of debt is dangerous for both our economy and for national security, America just cannot stop borrowing,” MacGuineas said. “There is not a single economic reason to add to the debt at the rate we are, but sadly our political leaders are unwilling to make the changes we need to turn the fiscal situation around.”
Other officials at the Washington-based non-profit warned that the enormous debt would spell trouble for the United States if the economy were to face challenging times in the months ahead.
“Hitting $34 trillion is another reminder of how unsustainable our fiscal situation is,” Marc Goldwein, senior vice president for the non-profit, told the Washington Post. “We’re adding $2 trillion to our debt every year at a time unemployment is near record lows … If we’re adding this much to the debt in good times, things may get really awful in bad times, and we can’t grow our debt faster than our economy forever.”
The nation’s total debt is $2 trillion more than it was at the beginning of 2022, while the Dow Jones Industrial Average has risen more than 9% in the past six months.
Economists hold differing views on the risk associated with massive federal debt, with some experts saying high debt threatens the economy, while others contend the federal government still has the ability to borrow substantially without triggering an economic crash.
The economy has expanded rapidly over the past several months, so the rise in the national debt is less concerning as borrowed dollars shake out as a relatively smaller chunk of the country’s overall economic activity.
President Joe Biden has cited GOP tax cuts as the reason for adding trillions to the deficit, while Republican lawmakers blame Biden’s spending policies, including massive amounts of foreign aid.
White House spokesman Michael Kikukawa said in a statement Tuesday that congressional Republicans were aiming to “double down on MAGAnomics with more than $3 trillion in giveaways skewed to the wealthy while forcing hardworking Americans to pay the price by cutting Social Security, Medicare and Medicaid.”
Recently, economic analysts with the Center for American Progress, a centrist policy institute based in Washington, reported that tax cuts implemented under Presidents George W. Bush and Trump, along with other bipartisan extensions, have added $10 trillion in new national debt.
US public debt tops $34 trln as Congress heads into funding fight