US debt hits new historic high
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The US Treasury Department reveals that the US national debt has reached a new high, reaching $32 trillion.
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President Joe Biden addresses the nation on the budget deal that lifts the federal debt limit and averts a US government default, from the Oval Office of the White House in Washington, Friday, June 2, 2023. (AP)
The US national debt passed a $32 trillion record for the first time this week, the Treasury Department revealed in data released on Friday.
This comes less than two weeks after President Joe Biden signed a bill that lifts Washington's $31.4 trillion debt ceiling, averting what could have been a first-ever US debt default.
The measure enables the government to borrow an unlimited amount of money until January 1, 2025, when the debt ceiling suspension expires. This means that the government can continue to pay for domestic services like social security and Medicare by borrowing money from overseas and effectively accruing even more debt.
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The debt ceiling was lifted after the US Treasury repeatedly warned that if it remained in place, the US would default on its obligations. The borrowing limit was exceeded in January, and the Treasury had only a limited arsenal of choices to avoid the default, which was slated for early June.
The concerns sparked a months-long battle between Republicans and Democrats over spending priorities, threatening the measure's ratification.
Federal borrowing breaks the record
On the first business day after the debt ceiling was scrapped, federal borrowing surged by roughly $400 billion. The $32 trillion mark was surpassed nine years earlier than predicted before the Covid-19 outbreak, the New York Times reported. Experts explained that to avert another economic catastrophe, the government must address the underlying causes of the debt.
“As we race past $32 trillion with no end in sight, it’s well past time to address the fundamental drivers of our debt, which are mandatory spending growth and the lack of sufficient revenues to fund it,” Michael A. Peterson, head of the Peter G. Peterson Foundation, told the news outlet.
The United States might incur another $127 trillion in debt over the following 30 years, according to the foundation's forecasts, with interest expenditures accounting for almost 40% of federal revenue by 2053.
US federal debt at a critical rate
Last week, the Government Accountability Office (GAO) issued a warning regarding the escalating debt of the United States Federal Government, cautioning that it is on an unsustainable path if its current rate of expansion continues.
The report stated that the federal government is facing a challenging fiscal future in the long term. By the end of the fiscal year 2022, the debt held by the public had reached approximately 97% of the gross domestic product (GDP).
The debt held by the public is projected to outpace the growth of the US economy, with estimates indicating that it will reach a historical high of 106% of GDP within the next decade, according to the GAO. Furthermore, the report emphasized that this trajectory will lead to an increasingly accelerated accumulation of debt.
"The fiscal outlook faces additional risks posed by delays in raising or suspending the debt limit," the report explained. "These delays could disrupt financial markets, and investors may require higher interest rates to hedge against increased risks, which could increase borrowing costs," the GAO said.
