The US National Debt Faces difficult years ahead

After US national debt figures broke the $34 trillion level for the first time in history earlier this year, the growth journey is heading for more records.

This figure constitutes 11% of the total global debt of $315 trillion, according to data from the Institute of International Finance, and is also an unprecedented record.

The latest US Treasury figures released last week reveal that the total national debt reached $34.8 trillion, with expectations that it will reach $35 trillion before the end of the current fiscal year ending next September.

The US national debt figures include total government debt and US debt instruments (bonds and bills), as well as corporate and household debt, which currently constitute 133% of US GDP.

Last Tuesday, a report by the US Congressional Budget Office was released, citing shocking figures for the US national debt in the coming years, until 2034.

According to the report, the US budget deficit will exceed $2 trillion in the coming years, meaning that the total expenditure exceeds the total revenues by $2 trillion annually.

In the current fiscal year, the budget office expects the total deficit to be $1.9 trillion, up from $1.6 trillion last fiscal year.

By the end of 2034, the Congressional Budget Office estimates that the total national debt will reach $50.7 trillion, a figure equivalent to almost 200% of US GDP for 2023.

This figure is higher than similar estimates by the same institution earlier this year, when it predicted that the total national debt would reach $48.3 trillion by 2034.

High interest rates on the US dollar of 5.5%, at a 23-year high, appear to be pushing the US national debt to grow further because of higher interest rates.

While the Biden administration projected a deficit of $1.6 trillion for the current fiscal year, the Treasury was borrowing at an annual rate of $2.3 trillion, due to high interest rates.

This additional debt, issued at current high interest rates, would increase Treasury’s annual interest expense by more than $100 billion.

But today’s relatively high interest rates affect more than just current deficit spending; When it comes time to pay off old debts, the Treasury issues new debt to cover what was originally borrowed, plus the interest accrued.

In 2025, the ruling White House party and monetary policymakers will face an escalating crisis, with continued borrowing to cover the deficit and the end of tax cuts approved in 2017.

This means that more financial burdens will be added to households and businesses; above all, the congressional decision to suspend the debt limit announced in May 2023 will expire, leading to a bipartisan standoff over federal spending.

The tax cuts approved in 2017 added nearly $2 trillion to existing debt.

Today, presidential candidate Donald Trump proposes to extend all of these cuts for years to come, which could add another trillion to the debt, which President Joe Biden also wants to keep for years to come, in an effort to win votes ahead of the election.

Experts told The Washington Post on Thursday that the debt burden could pose risks in bond markets as creditors become increasingly skeptical about the government’s ability to repay its growing debt.

A high debt stock is also likely to keep federal interest rates high, forcing Congress to shift much of its tax revenue into debt service.