Source-Business-Standard)
As the year came to a close, the national debt in the United States reached a new record high, standing at a staggering $33.9 trillion. This figure comprises $26.9 trillion in debt held by the public and an additional $7 trillion accounting for intragovernmental holdings – essentially, debt that the Treasury owes to other government agencies.
Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, expressed concern over the rapid increase in debt, emphasizing that there is no sound economic reason to add to the debt at the current rate. She lamented the reluctance of political leaders to implement the necessary changes to address this fiscal predicament.
Increase in Interest Rates:
One significant factor contributing to the escalating debt is the rise in interest rates observed over the past eighteen months, a consequence of Federal Reserve policy tightening aimed at combating inflation. Michael Faulkender, a former Treasury official and chief economist at the America First Policy Institute, highlighted the impact of higher interest rates on the substantial portion of the federal government’s debt with short maturities. This situation has resulted in increased interest payments on the national debt, adding to the financial burden.
The consequences of this mounting debt burden have become increasingly evident. In November, Moody’s, a top rating firm, issued a warning about the federal government potentially losing its perfect credit rating, primarily due to its inability to effectively manage the accumulating debt.
Beyond economic implications, Faulkender underscored the national security component associated with maintaining the United States’ status as the world’s reserve currency. Neglecting efforts to address the unsustainable fiscal situation could jeopardize this critical status, posing potential risks to the nation’s economic and national security.
Long delays cause national debt:
On Capitol Hill, lawmakers face a looming deadline to pass a comprehensive federal budget, with various components due by January 19. While spending levels for 2024 were agreed upon last summer by the White House and House Republicans, the adherence to these levels remains uncertain. The longer Congress delays passing a budget, the higher the likelihood that critical government programs – although unspecified – will experience automatic budget cuts through sequestrations stipulated in the bipartisan deal. The urgency to address the growing national debt and pass a budget that ensures fiscal responsibility is becoming increasingly paramount.
