US’ debt reaches all time high of $31 trillion, by 2029 interest payments may overtake defence expenditure

America’s gross national debt has reached an unfortunate high of $31 trillion for the first time ever, revealed a Treasury Department report on Tuesday. The artificial borrowing cap Congress imposed on the US government is progressively getting closer as debt edges closer to the statutory ceiling of $31.4 trillion.

The debt threshold not only spells trouble for the nation’s economy but also poses a problem for Joe Biden who will once again be running for President in 2024. 

He had promised to reduce US budget deficits i.e., what government earns through tax revenue vs the money it spends by $1 trillion over a decade. However, as per estimates by the Committee for a Responsible Federal Budget estimates, his policies have added nearly $5 trillion to the deficit since he took office in 2020. 

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Even as President Joe Biden touts his administration’s attempts to reduce the deficit and even introduced the so-called Inflation Reduction Act that attempts to tame a 40-year price increase, economists say that the latest debt numbers are a cause for concern.

This comes as higher borrowing costs replace the nation’s historically low-interest rates as the Federal Reserve attempts to combat rapid inflation.

To combat the pandemic and finance tax cuts the government undertook record levels of borrowings, which due to the higher rates are making America’s debt costly over time.

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As per estimates by the Peterson Foundation, higher rates could add around one trillion dollars to US federal government’s interest payments this decade. Additionally, the Congressional Budget Office (CBO) May forecast that debt costs would reach a record $8.1 trillion.

If interest rates on the nation’s debt increase by just one percentage point beyond what the CBO forecasts over the next few years, interest payments might surpass United States’ national defence expenditure by 2029, reports the New York Times.

(With inputs from agencies)

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