US public debt tops $31 trillion for first time
(ORDO NEWS) — The US national debt for the first time exceeded $31 trillion. Rising interest rates lead to higher borrowing costs, and Biden’s policies increase the federal budget deficit, writes The New York Times. Biden’s critics point to the dependence of long-term borrowing on interest rates and the unreasonableness of earlier decisions.
US public debt on Tuesday for the first time exceeded $ 31 trillion, follows from the data of the US Treasury. Crossing that threshold poses a political challenge for President Joe Biden, who has pledged to cut the federal deficit by $1 trillion over the course of a decade. Biden’s policies have added nearly $5 trillion to the deficit since the start of his presidency, writes The New York Times, citing estimates from the Committee on a Responsible Federal Budget.
The White House says they are satisfied with the levels of debt and deficits in the Biden administration’s projections. “Our budgets <…> create a very attractive architecture for critical investment and financial responsibility,” said Jared Bernstein, a member of the White House Council of Economic Advisers. According to the chief executive officer of the Peter Peterson Fund (contributes to the reduction of the budget deficit) Michael Peterson, fears about the growth of debt appear as interest rates rise. In September, the US Federal Reserve System raised the key rate, bringing it to the range of 3-3.25% per annum. It is expected that by the end of the year the rate may rise to 4.25-4.5%.
According to the US Treasury, by October 4, the US national debt amounted to $31.123 trillion, which was a record high in the country’s history. “Too many people were happy with our debt rate in part because the rates were so low,” Peterson said. The Peterson Foundation estimates that higher rates could add an additional $1 trillion to the decade’s planned interest payments on government debt. In May, the Congressional Budget Office projected a record $8.1 trillion in debt spending.
The US government is constantly issuing new debt, which effectively means that the cost of borrowing rises and falls along with interest rates, writes NYT. Earlier in 2022, the Central Bank warned of a growing US debt burden and said investors could lose confidence in the government’s ability to repay its debts. The Central Bank and the White House predict that public debt, measured as a share of the size of the economy, will decline slightly over the next fiscal year before increasing again in 2024 – the economy is expected to grow faster than debt.
Biden promised to cut the federal budget deficit by $1 trillion over the course of a decade. The Committee on a Responsible Federal Budget estimates that Biden’s policies have added nearly $5 trillion to the deficit since the start of the presidency. Those estimates include a $1.9 trillion economic stimulus bill signed by Biden, a series of new spending initiatives approved by Congress, and a $400 billion over 30 year student loan debt relief plan.
“We reduced the deficit by $350 billion in the first year and by almost $1.5 trillion this year,” Biden said at a Democratic National Committee event in Washington in September. The deficit narrowed in large part because pandemic aid was not provided this year, the NYT notes. Harvard University economist and former chief economic aide to President Barack Obama Jason Fuhrman noted that “the deficit trajectory is almost certainly too high.”
Manhattan Institute Senior Fellow Brian Riedle said the US was unwise to take on long-term debt based on short-term managed interest rates. According to him, Washington is “engaged in a long-term debt crisis,” and adding debt will only “add fuel to the financial fire.”
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