Wednesday, May 8, 2024

The $34 Trillion U.S. Debt Is Nearly As Big As The Economy, May 8, 2024

 






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From Adam to Abraham was 2,000 years

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From Yeshua to now is 2,000 years, this wicked, evil world will soon be ended by Yeshua

The $34 Trillion U.S. Debt Is Nearly As Big As The Economy And There’s (Still) No Plan To Fix It.

 

Wednesday May 1, 2024

 

 

The nation’s debt, currently over $34 trillion, is rapidly growing as U.S. lawmakers have been unable to agree to long-term budget reforms that could tame it.

Officials from several institutions warn a tipping point is near and it will only get worse if it snowballs into a crisis. The national debt is currently almost the same size as the entire U.S. economy, which is roughly $27.3 trillion, according to a Council on Foreign Relations report, and is on track to double within the next thirty years.

In the last few months, officials at several institutions including the International Monetary Fund, Congressional Budget Office and banking giant Goldman Sachs Group have cautioned that the country’s skyrocketing debt is a big problem–literally bigger than ever before–and some fear similar market chaos that derailed former UK Prime Minister Liz Truss’ economy when she was in office in 2022.

The UK economic fiasco under Truss was due to a radical economic proposal of tax cuts and borrowing–which triggered market turmoil in Britain, causing the value of the pound to plummet and Truss to announce her resignation after just six weeks as Prime Minister.

In the U.S., IMF officials have warned that public spending and borrowing will “overheat” the country’s economy, while pushing up funding costs in the rest of the world. Phillip Swagel, the director of the Congressional Budget Office, said the country’s debt is on an “unprecedented” trajectory in an interview with the Financial Times, and could risk a Truss-style economic crisis. John Waldron, the president and COO of Goldman Sachs, expressed a similar concern at Semafor’s World Economic Summit on April 18.

A Truss-style market crash in this country “is a potential risk,” said Lawrence Gillum, chief fixed income strategist at market insights group LPL Financial, especially “if these budget deficits continue to widen.”

“It took the U.S. around 220 years to issue $11 trillion of the national debt, but we’ve added $11 trillion of debt over the last four years alone,” Gillum told Fortune, adding that the national deficit spending, or the amount the country spends in relation to how much it collects in taxes, is also “pretty large.”

The country’s current deficit spending is $1.06 trillion, according to fiscal year 2024 data from the Treasury Department, and while there have been large budget deficits in the country for quite some time, Gillum explained, “they usually aren’t as large as they are, absent a war or a recession.” The current budget deficit, Gillum said, is “6% to 8% of gross domestic product levels, which is pretty large in the absence of a financial crisis.”

And as the country gears up for another election year, it’s important to note that policies from both political sides contribute to national debt in different ways.

Debt will be “a big topic on the campaign trail.” 

“Neither party can really claim fiscal responsibility anymore because both parties have added to the deficit,” Gillum said, citing Trump’s tax cut programs and Biden’s spending on the Inflation Reduction Act. Indeed, several types of spending contribute to the nation’s high debt and policies have been rolled out by both political sides.

On one hand, there’s Bidens’ Inflation Reduction Act of 2022, a range of tax laws and green energy tax credits heralded as a major victory for climate change, that was meant to reduce the nation’s deficit spending but actually increased it. Then, there’s former president Trump’s tax bill, enacted when Republicans gained control of the White House and both houses of Congress in 2017, which cut the corporate tax rate from 35% to 21% and slashed estate taxes for most family farmers and small-business owners.

Simply speaking, Gillum explained, the reason the country has high debt is due to an “increase in spending and decreasing taxes that are driving the budget deficits wider.”

The fix, according to Quincy Krosby, a chief global strategist for LPL Financial, is to raise taxes. “Whether it’s the Democrats or the Republicans, you can choose to raise taxes,” she said, and doing so is “extremely important because Americans across the country believe that billionaires should increase the taxes they pay,” so the government can afford programs like Social Security without deepening its debt.

As it turns out, the national debt is indeed a growing concern for Americans. According to a 2023 Pew Research Center survey about the public’s policy priorities, 57% of Americans believe reducing the budget deficit should be a top priority for the president and Congress to address this year, up from 45% the year prior.

The national debt is now higher than it’s ever been before, according to the Treasury Department, and spiked following the government’s response to the pandemic, Gillum said, rising from $22.7 trillion in 2019 to over $30 trillion in 2022. There’s also no plan in place to fix it.

“Unfortunately, politicians probably won’t react until or unless there’s a crisis,” Gillum said, adding “this is one of the things we’ve identified as a potential risk.”

The biggest contributor to national debt, along with years of elevated budget deficits and colossal federal spending during the pandemic, is spending on national emergencies, like major wars and rising healthcare costs, according to Krosby. “All of the benefits that are expected by a large portion of the U.S, especially when it comes to healthcare and Social Security, and also the country’s increasing defense spending, given the complexity of the geopolitical backdrop,” contribute to debt. It’s a problem she acknowledges has gotten out of hand.

To be sure, the nation’s high debt and deficit spending has helped propel the economy forward by giving individuals more money to buy and invest more, and the “amount of debt hasn’t hindered economic growth yet,” Gillum said. High debt does, however, add to “the inflation problem,” he added, saying “it certainly helped the economy grow, but it’s had an impact on higher prices as well.”

 

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