US national debt hits record $34 trillion

US national debt hits record $34 trillion
  • PublishedJanuary 4, 2024

The US government’s debt has topped $34 trillion for the first time, just weeks ahead of deadlines for Congress to agree to new federal funding plans.

Data published by the Treasury Department showed that “total public debt outstanding” rose to $34.001 trillion on December 29. That figure, also known as the national debt, is the total amount of outstanding borrowing by the US federal government accumulated over the nation’s history.

The milestone comes just three months after the US national debt surpassed $33 trillion, as the budget deficit — the difference between what the government spends and what it receives in taxes — ballooned.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a fiscal watchdog, called the record figure “a truly depressing ‘achievement.’”

“Though our level of debt is dangerous for both our economy and for national security, America just cannot stop borrowing,” she said in a statement Tuesday.

Also of concern is that the national debt is increasing during a time when the economy is relatively strong and unemployment is low, which is considered a good time to rein in the federal deficit. The government often boosts spending during weak economic periods and high unemployment in an effort to stimulate growth.

The national debt has become a major point of contention between Republicans and Democrats, aggravating standoffs over the federal budget that threaten to shut down the government periodically.

The debt has soared under both parties in recent years. Republicans say federal spending programs championed by the Biden administration are too expensive, and Democrats say GOP-backed tax cuts in 2017 have squashed revenue. Costly federal Covid-19 relief packages, passed during both the Trump and Biden administrations, also contributed to the increase in the debt.

White House spokesperson Michael Kikukawa said the rising sum was “driven overwhelmingly by repeated Republican giveaways skewed to big corporations and the wealthy,” which led to cuts to Social Security, Medicare and Medicaid that hurt ordinary Americans.

Kikukawa said President Joe Biden had a plan to reduce the deficit by $2.5 trillion by “making the wealthy and big corporations pay their fair share and cutting wasteful spending on special interests,” including large pharmaceutical and oil companies.

Whoever is to blame, mounting debt and political brinksmanship have already taken their toll on America’s credit rating. Fitch cut its rating on US sovereign debt to AA+ from AAA last August; in November, Moody’s warned that it could also remove the US’ last perfect AAA rating.

Another potential shutdown

Lawmakers in Washington are facing deadlines for the passage of fiscal year 2024 department budgets in January and February after Congress passed two stopgap funding bills to avert government shutdowns. The fiscal year started October 1.

The most recent bill, passed in mid-November, extended funding until January 19 for priorities including agriculture, military construction, veterans affairs, transportation, housing and the Energy Department. The rest of the government was funded until February 2. It did not include additional aid for Ukraine or Israel.

House Republican lawmakers are pushing to reduce spending below the levels agreed to in the June debt ceiling deal, which enabled the federal government to continue paying its bills in full and on time and avert a first-ever default. The agreement suspended the debt ceiling through January 1, 2025.

The Democrat-led Senate, however, has rejected the GOP calls for cuts. Congressional leaders are currently negotiating a topline funding level for fiscal year 2024 as the threat of a shutdown looms again.

Separately, House Speaker Mike Johnson wants to create a bipartisan debt commission to tackle what he termed “the greatest threat to our national security.”

“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.

According to the Treasury, the debt that counts towards the debt ceiling — which limits how much the government is allowed to borrow and is also a frequent source of political brinksmanship — rose to $33.89 trillion.

Rising government debt burdens in the United States and elsewhere have become a growing cause for concern because of a recent rapid rise in interest rates, which has made it much more expensive to service that debt. Net interest costs soared 39% in fiscal year 2023, which ended September 30, compared to the previous year, according to the Treasury Department. And it’s nearly double what it was in fiscal year 2020.

The meteoric rise in interest payments — which stems from both the increase in the nation’s debt and the Federal Reserve’s repeated rate hikes — also makes it more difficult for lawmakers on either side of the aisle to achieve their fiscal priorities on Capitol Hill.

According to the Peter G. Peterson Foundation, an American bipartisan group that advocates for fiscal responsibility, the US government spends $2 billion a day on debt interest payments alone. Treasury expects to borrow nearly $1 trillion more by the end of March.

“America’s high and rising debt matters because it threatens our economic future,” the foundation said in a statement Tuesday.

It noted that within 10 years, the federal government will spend more on interest payments than it traditionally has on research and development, infrastructure and education, combined.

SOURCE: CNNNEWS

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