The latest figure of $30.01 trillion represents an increase of almost $7 trillion from late January 2020, just before Covid.
U.S. government debt breached the $30 trillion mark Monday, hitting a new record high. And if interest rates keep rising, that number could increase in a hurry.
The latest figure of $30.01 trillion represents an increase of almost $7 trillion from late January 2020, just before the Covid pandemic struck. And the total easily surpasses the $23 trillion of economic output (GDP) that the U.S. registered in 2021.
The debt carries ominous tidings, experts say. “Hitting the $30 trillion mark is clearly an important milestone in our dangerous fiscal trajectory,” Michael Peterson, CEO of the Peter Peterson Foundation, which advocates for deficit reduction, told The New York Times.
“For many years before Covid, America had an unsustainable structural fiscal path because the programs we’ve designed are not sufficiently funded by the revenue we take in.”
The country has run up substantial budget deficits since Bill Clinton’s administration’s balanced budgets of 1998-2001. The deficit has recently ballooned following the $1.5 trillion tax cut enacted in 2017 and the $5 trillion of government spending approved to lessen the pandemic’s blow.
In the fiscal year ended last September, the budget deficit hit $2.8 trillion, or 12.4% of GDP, up from 4.7% in September 2019, according to the Congressional Budget Office, The Wall Street Journal reports.
As for government debt, in December 2007, right when the Great Recession started, it totaled only $9.2 trillion, according to the Treasury, CNN reports.
Meanwhile, in January 2020, the CBO forecast that debt wouldn’t hit $30 trillion until about the end of 2025 and that debt wouldn’t exceed GDP until about 2031, according to The Times.
“This [$30 trillion] is a jaw-dropping number that is a real cause for concern,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget, told The Journal. “It is the result of both borrowing for really important crises, most notably the Covid pandemic, but also trillions and trillions of borrowing for no reason other than politicians have stopped being willing to pay the bills.”
Rising Interest Rate Could Mean Rising Debt Costs
Now the concern is that rising interest rates will increase the government’s debt-service costs. The 10-year Treasury yield has risen 67 basis points over the last year to 1.77%. And the Federal Reserve has indicated it will likely begin raising rates in March, with economists and investors generally expecting four or more rate hikes this year.
The Peterson Foundation figures that interest costs on the debt will exceed $5 trillion over the next decade and will total almost half of all federal revenue by 2051, CNN reports.
“The economy is unpredictable, and we should never take low-interest rates and inflation for granted,” Brian Riedl, a senior fellow at the Manhattan Institute, told The Times.
The risks of our rising debt aren’t immediate, experts say. “It doesn’t mean a short-term crisis, but it does mean we are going to be poorer in the long term,” David Kelly, chief global strategist at JPMorgan Asset Management, told CNN.
Our aging population and rising healthcare costs are the main factors that will drive up the debt long-term, the Peterson Foundation’s Michael Peterson told CNN. “The polarization of our government and, to some extent, our population, makes implementing solutions more difficult,” he said.
