Recently, the Wall Street Journal issued a report that presents a staggering portrayal of the current landscape of American debt. On January 31, the United States’ public debt surpassed $30T for the first time in history, with current debt levels standing at approximately $30.1T.
Over the course of the coronavirus pandemic, the American government has spent upwards of $7T on pandemic-related relief in order to avert a full-blown recession.
However, the recent $30T debt milestone has emerged during a time when multiple COVID relief programs have expired, which is why legislators currently find themselves in a period of major transition in terms of the government’s future monetary and fiscal policy.
In addition, investors are also closely watching for signals from the Federal Reserve regarding when the central bank may start increasing short-term interest rates, which are currently hovering near zero. With inflation spiking to approximately 7 percent, the Fed hopes increases in interest rates will help stymie rapidly rising inflation.
Maya MacGuineas, who serves as the President of the nonpartisan Committee for a Responsible Federal Budget, informed the Wall Street Journal that the $30T debt milestone truly is “a jaw-dropping number” which constitutes “a real cause for concern.”
MacGuineas noted that some of the debt can be attributed to “both borrowing for really important crises,” though she added that “trillions and trillions” had been borrowed for apparently “no reason other than politicians [who] have stopped being willing to pay the bills.”
Michael Peterson, who serves as the Chief Executive of the nonpartisan Peter G. Peterson Foundation, also added that the $30T debt milestone should serve as “a giant red flag for all of us about America’s future economic health, generational equity, and role in the world.”
Under the Biden and Trump administrations, Congress has authorized multiple trillions in relief to provide assistance to unemployed workers, small businesses, and parents and renters. The relief has come primarily in the form of the Paycheck Protection Program (PPP), alongside multiple “enhanced” unemployment benefits.
However, other public figures have adopted a different perspective.
Janet Yellen, who serves as the nation’s Treasury Secretary, recently proclaimed at the World Economic Forum (WEF) that “it was appropriate to engage in spending [that hadn’t been] financed by tax increases” in order to respond effectively “to the downturn in the economy induced by the pandemic.”
In the present environment with near-zero interest rates, Yellen claims that the current levels of American debt are ostensibly “very manageable.”
Currently, the U.S. deficit is approximately 12.4 percent of the nation’s total GDP, representing a significant increase over the past few years.
In the fiscal year that ended on September 2021, the federal budget deficit of $2.8T grew to an astonishing 12.4 percent of U.S. GDP.
The present concerns over the U.S. deficit have undoubtedly influenced Congress’s unwillingness to pass President Joe Biden’s massive Build Back Better (BBB) infrastructure bill, which included various provisions for climate change, health care, and educational systems.