The country’s volatile fiscal trajectory was highlighted on Friday as Washington gears up for a new battle over government spending, with the country’s total debt surpassing $32 trillion for the first time.
The Treasury Department report said it came weeks after Congress agreed to suspend the country’s statutory debt ceiling, ending a months-long stalemate.
The $32 trillion mark was reached nine years earlier than pre-pandemic expectations, reflecting multitrillion-dollar emergency spending to deal with the impact of COVID-19 as economic growth slows.
Republicans and Democrats have expressed concern about the nation’s debt, but neither party has shown any willingness to address the biggest drivers of debt, such as spending on Social Security and Medicare.
A recent bipartisan agreement to suspend the debt ceiling for two years would effectively freeze some of the money expected to grow next year, then limit spending to 1% growth, according to the Congressional Budget Office. That would cut federal spending by $1.5 trillion over 10 years. But even after accounting for the newly passed spending cuts, the debt is poised to exceed $50 trillion by the end of 2010.
Mark Zandy, chief economist at Moody’s Analytics, said during the May standoff that spending cuts proposed by lawmakers failed to address the costs of social safety net programs. He said avoiding a default would prevent an immediate crisis, but ballooning debt was a deep problem that needed to be resolved.
“The long and daunting financial challenges of the country remain,” Mr Zandi said.
The House Appropriations Committee will start reviewing the next appropriations bill this week, funding federal agencies at lower levels than agreed by President Biden and Speaker Kevin McCarthy to appease the ultra-conservative Republican majority. suggested a policy to
Failure to pass and coordinate bills in both houses of Congress by October 1 could lead to a government shutdown. And if individual bills are not approved by the end of the year, an automatic 1% cut will be implemented.
At the same time, House Republicans this week began considering new tax cuts. The bill expands the standard deduction for individual taxpayers and some business tax incentives aimed at encouraging investment while curbing energy tax credits. The Committee on the Responsible Federal Budget, which advocates lower spending levels, estimates that the proposed bill would cost $80 billion over 10 years, or $1.1 trillion if the measures were made permanent.
Some are calling on Congress to create a bipartisan finance committee to deal with the long-term drivers of the national debt.
“As we move past $32 trillion with no end in sight, the time is long past to address the root cause of the debt: increased mandatory spending and a lack of sufficient revenue to finance it.” said Commissioner Michael A. Peterson. Executive of the Peter G. Peterson Foundation promoting deficit reduction.
The Peterson Foundation has expressed concern about projections that the US will add $127 trillion in debt over the next 30 years and that interest costs will account for nearly 40% of total federal revenue by 2053.
Treasury Secretary Janet L. Yellen has vehemently defended the Biden administration’s handling of national finances. This week’s hearings of the House Financial Services Committeepointed out that the White House has announced a budget proposal that will reduce the deficit by $3 trillion this year. He also told the committee that interest rates are likely to fall in the medium term, making the debt burden more manageable.
The Treasury secretary has suggested that Republican-backed tax policies will make the fiscal situation worse.
“These policies benefit wealthy individuals and businesses and do nothing for working families,” Yellen said. “It’s not being paid, which means more debt.”
