Economist Peter Morici reveals what the national debt is, why it has risen to more than $34 billion and what it means for Americans.
America’s national debt is rising rapidly and shows no signs of abating, despite growing criticism of massive levels of government spending.
The national debt – which measures what the US owes its creditors – rose to $35,943,554,220,297.64 as of November 8, according to the latest numbers published by the Treasury Department. That’s up $31.5 billion from the figure reported the previous day.
By comparison, just four decades ago, the national debt was around $907 billion.
The outlook for the federal debt level is bleak, as economists are increasingly raising the alarm about the poor pace of spending by Congress and the White House. Interest payments on the debt for the federal fiscal year, which begins in October, now outpace Medicare spending and the defense budget.
FAILURE TO FORCE PUBLIC DEBT TO RECORD LEVEL IN 4 YEARS
Recent findings from the Congressional Budget Office show that the national debt will grow to $54 trillion over the next decade, the result of an aging population and government health care costs. High interest rates also compound the pain of high debt.
If that debt materializes, it could jeopardize America’s economic standing in the world.
“America’s fiscal situation is more dangerous and scary than ever, threatening our economy and the next generation,” said Michael Peterson, CEO of the Peter G. Peterson Foundation, which advocates for reducing government deficits. “This is not the future that any of us want, and it is not the way to run a great nation like ours.”
BIG FAILURES, HIGH INTEREST RATES MAKING THE FEDERAL DEBT UNSUSTAINABLE
The unrelenting increase is what prompted Fitch Ratings to issue a surprise downgrade to the country’s long-term debt rating by mid-2023. The agency cut US debt by one notch, snapping its clean AAA rating to an AA+ grade. While making this decision, Fitch expressed shock at the collapse of the country’s finances and also expressed concern about the government’s ability to deal with the debt burden that has decreased amid political divisions.
“This is a warning taken by the US government that it needs to right its ship,” said Sean Snaith, an economist at the University of Central Florida, told FOX Business. “You can’t just spend billions of dollars more than you earn a year and expect bad results.”
The growth in the national debt follows excessive spending President Biden and democratic legislators.
As of September 2022, Biden had already approved about $4.8 trillion in borrowing, including $1.85 billion for a COVID relief measure called the American Rescue Plan and $370 billion for a bipartisan infrastructure bill , according to the Committee on a Responsible Federal Budget (CRFB), a group that advocates for deficit reduction.
US PAYS RECORD AMOUNT OF INTEREST ON ITS NATIONAL DEBT
While that’s about half of the $7.5 billion that former President Donald Trump added to the debt while in office, it’s far more than the $2.5 trillion that Trump authorized during his tenure.
Biden has repeatedly defended his administration’s spending and boasted of reducing the deficit by $1.7 trillion.
“I might state the obvious: In my first two years, I reduced the debt by $1.7 trillion. No President has ever done that,” Biden said recently.
However, that figure represents a reduction in the national deficit between fiscal years 2020 and 2022; while the deficit decreased during that time, that is because the emergency measures put in place during the COVID-19 pandemic have expired.
The White House has also tried to blame Republicans for the rising debt levels in recent years.
“This is a shrinking debt — driven largely by the Republicans’ repeated handouts to big corporations and the wealthy,” said Michael Kikukawa, White House assistant press secretary, in a statement provided to FOX Business after the debt passed $34 trillion.
US NATIONAL DEBT TOPS $34T FOR FIRST TIME IN HISTORY
More worryingly, the rise in interest rates over the past year and a half has made the cost of servicing the national debt very high.
That’s because as interest rates rise, the federal government borrowing costs its debt will also increase. In fact, interest payments on the national debt are estimated to be the fastest growing part of the federal budget over the next three decades, according to the CRFB.
The US Capitol in Washington, DC (Julia Nikhinson/Bloomberg via Getty Images/Getty Images)
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Payments are expected to triple from about $475 billion in fiscal year 2022 to $1.4 trillion in 2032. By 2053, interest payments are expected to rise to $5.4 trillion. To put that in perspective, that would be more than the US spends on Social Security, Medicare, Medicaid and all other mandatory and discretionary spending programs.
“It’s clear we’re on the wrong financial path,” said CRFB President Maya MacGuineas. “We need to do better.”
While debt has long been a concern of politicians and budget hawks, how concerned should you be about the nation’s rate of borrowing?
Experts say that when the debt rises, the US pays more in interest costs each year. Those costs can outpace key public investments that drive economic growth – areas like education, research and development and infrastructure.
“A nation in debt will have little to invest in its future,” says the Peter G. Peterson Foundation.
A Pew Research Center study published in 2023 found that 57% of Americans think that reducing the budget deficit should be a priority for the president and Congress – up from just 45% last year.
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