The escalation of the U.S. national debt to over $34 trillion for the first time has sparked significant concern and debate among policymakers and experts. Maya MacGuineas, president of the Committee for a Responsible Federal Budget, expressed deep concern over this milestone, emphasizing the dangers it poses to the economy and national security. She highlighted the troubling trend of accumulating debt even during periods of economic strength and low unemployment, traditionally seen as opportunities for deficit reduction.
The issue has become a contentious topic between Democrats and Republicans, each blaming the other party’s policies for the soaring debt. Republicans point to federal spending programs supported by the Biden administration, while Democrats attribute the increase to the tax cuts implemented in 2017. Additionally, costly COVID-19 relief packages passed during both the Trump and Biden administrations have further contributed to the debt burden.
White House spokesperson Michael Kikukawa criticized what he described as “repeated Republican giveaways skewed to big corporations and the wealthy” as a significant factor driving the rise in debt. In response, President Biden has proposed a plan aimed at reducing the deficit by $2.5 trillion through a combination of measures, including raising taxes on the wealthy and cutting spending on special interests.
The debate surrounding the national debt underscores the complex and challenging fiscal landscape facing the United States, with divergent views on the best approach to address the issue and ensure long-term fiscal sustainability.
The sharp rise in interest rates and the corresponding increase in net interest costs have brought the issue of servicing the U.S. national debt to the forefront. Fiscal year 2023 saw a significant spike in net interest costs, which surged 39% compared to the previous year, nearly doubling from fiscal year 2020. According to the Peter G. Peterson Foundation, the U.S. government now spends a staggering $2 billion per day solely on debt interest payments.
Economists like Dana M. Peterson and Lori Esposito Murray from The Conference Board view this situation as an “urgent crisis.” They argue that the mounting debt, coupled with the breakdown in governance and budget processes, poses severe risks to U.S. global leadership and national security. With the national debt already surpassing $33.6 trillion, they contend that the debt crisis has already emerged.
However, some experts argue that the statistics on interest payments do not necessarily warrant immediate concern. They point out that as the national debt has risen, so has the U.S. economic output measured by gross domestic product (GDP). This increase in GDP enhances the government’s capacity to generate revenue and repay its debts in the future.
Treasury Secretary Janet Yellen has highlighted the importance of assessing net interest payments as a share of GDP to gauge the country’s fiscal trajectory. Despite the recent rise in interest rates, Yellen noted that this ratio remains at a relatively low and manageable level of around 1%, suggesting that the government’s debt burden is still sustainable in the broader economic context.