US federal debt at critical rate, overtaking output of US economy

By Al Mayadeen English
Source: Agencies
7 Jun 2023 12:35

The Government Accountability Office warns against rising US public debt reaching 97% of the GDP in the fiscal year of 2022.

In this June 15, 2018 photo, twenty dollar bills are counted in North Andover, Mass (AP Photo/Elise Amendola, File)

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).

According to the GAO, 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. 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.

The GAO underscored the critical consequences of failing to raise or suspend the debt limit in a timely manner, warning that it would have severe repercussions on the domestic economy of the United States, global economies, and the American public at large.

US President Joe Biden on Saturday signed into law a bipartisan debt ceiling bill, narrowly averting a $31 trillion debt default that would have shaken the world's biggest economy had the bill not been signed before June 5.

The law, titled Fiscal Responsibility Act of 2023, grants the government authorization to extend the debt ceiling to renew borrowing and allow the government to meet its obligations.

On Friday, Biden said that the bill saved the country from "economic collapse," adding that the bill was the result of a bipartisan compromise where "no one got everything they wanted," he said as he spoke from behind the historic Resolute Desk on live primetime television.