America’s national debt crisis could spell disaster for the world Pipa News

America’s national debt crisis could spell disaster for the world

BEIJING: More than 33 years ago, a billboard-sized running total display was installed off Times Square in New York City to remind passersby how much money the US federal government has borrowed from the public And haven’t paid back yet.
However, this figure, known as the national debt clock, did not bother successive US governments, including the current administration. It read US$31.1 trillion for the first time on October 3, and is still ticking insanely high.
Rising close to the statutory limit of $31.4 trillion placed by the US Congress on the government’s borrowing capacity has raised concerns about US financial stability and its negative spillover effects on global financial markets.
The US Treasury Department’s daily Treasury statement released on October 4 said total public debt outstanding reached $31.1 trillion as of October 3, including $24.3 trillion held by the public and $6.8 trillion in intergovernmental holdings.
In fact, real-time data released by the official website of the National Debt Clock showed that the debt numbers, which have so far exceeded $31.1 trillion, amounted to more than $93,400 per US citizen, and nearly $250,000 per US citizen. is debt. taxpayer.
Given the new record, the ratio of US federal debt to GDP has risen to about 126 percent, the data showed.
An estimate by British financial media outlet Finbold showed that in 2022 alone, the US national debt grows by about $6 billion every day.
The Peter G Peterson Foundation (PGPF) noted in an article published last week that the number exceeds the value of the economies of China, Japan, Germany and the UK combined.
Even if every American household paid $1,000 a month, it would still take 19 years to pay off the debt, the article noted.
“This is a new record that no one should be proud of,” said Maya McGinnis, chair of the budget watch group The Committee for a Responsible Federal Budget.
About eight months ago, the total US public debt outstanding exceeded $30 trillion, a fiscal milestone. In an effort to stave off a looming loan default, the US Congress passed legislation in December to raise the debt limit to the current $31.4 trillion. However, the hike failed to prevent the US national debt from reaching nosebleed levels.
“While much of that new borrowing was necessary to combat COVID, we are now past the most serious challenges of the pandemic, and it is time to budget responsibly – yet we are still borrowing,” McGinnis said. Told.
“The coronavirus pandemic sharply intensified our financial challenges, but we were already on an unsustainable path, structural drivers that existed long before the pandemic,” the PGPF said.
As the Foundation noted, the United States has enjoyed increased borrowing over the past decades, with gross debt rising from $3.2 trillion in 1990 to $5.62 trillion in 2000, and then to 13.56 trillion in 2010. The country’s gross debt reached 27.72 trillion. dollar in 2020, and crossed $30 trillion at the end of January.
A significant portion of total federal spending went to the US national defense budget. An article released by the PGPF in early May showed that US defense spending accounts for more than 10 percent of all federal spending, and has remained No. 1 in the world for years.
Till Us, an American nonprofit aimed at creating national debt awareness on college campuses, noted in an article published in 2020 that by 1982, the nation’s national debt reached the 1 trillion mark for the first time in history since the Vietnam War. . Cold War.
“By the 21st century, the national debt has grown to $20 trillion after major events such as the War on Terrorism,” it said.
The federal government’s massive spending on endless wars has led to an abrupt reversal of its monetary strategy from its massive stimulus package, rounds of tax cuts as well as the US Federal Reserve’s one-year “quantitative easing” policy. , which, the US Banks National Association said in an article in late September, “is likely to weaken the job market as businesses slow activity due to higher borrowing costs.”
In December 2020, the then US President Donald Trump signed a $2.3 trillion spending package. In 2022 alone, the US Congress and President Joe Biden have approved a combined $1.9 trillion in new borrowing, and have approved $4.9 trillion in new deficits since Biden took office.
To prevent the government from defaulting on its legal obligations, the U.S. Congress has taken 78 separate acts since 1960 to permanently increase, temporarily extend, or revise the definition of debt limits, according to the Treasury Department. noted.
“We are addicted to debt,” McGinnis said, adding that for decades, US lawmakers have chosen to “pass politically easier policies” rather than face the challenges of true governance.
“Basically, Washington is engaged in a long-term debt spree,” said a New York Times article published on October 4.
“If we don’t cut spending, disaster will strike,” US TV reporter John Stossel tweeted two days after the US national debt hit a new record. As he wrote, galloping American borrowings, if not managed properly, would be nightmares for both the United States and the world at large.
As it stands, the United States is set to breach the 50-trillion-dollar mark in debt by 2030, Forbes estimated in September 2020.
In a report released in May, the Congressional Budget Office (CBO) warned that such a loan path would increase borrowing costs for the private sector, resulting in lower business investment and increased economic output over time. will slow down.
To make things worse, as the Fed is determined to raise interest rates to tame inflation, the US government will have to pay more for its heavy borrowing. The PGPF noted in an article published in September that “interest payments will be approximately $66 trillion over the next 30 years and will take up about 40 percent of all federal revenue by 2052. Interest costs will also become the largest ‘program’ over the next few years.” decades.”
A Wall Street Journal opinion stated, “Interest on the national debt is exploding and causing what economists refer to as the ‘doom loop’—a vicious cycle in which the government borrows to pay interest and pays more interest and more money.” Still have to borrow more.” At the end of September.
“Investors run the risk of losing confidence in the US government’s ability to service and repay its debt, leading to a sudden rise in interest rates and inflation upward, or other disruption,” the CBO said in May. A financial crisis in the United States.
Meanwhile, if the US government defaults on its bills and shuts down amid bitter partisan wrangling, it would “detonate a bomb in the middle of the global financial system,” said Jacob Kierkegaard, a senior fellow at the Peterson Institute for International Economics. told. Voice of America (VOA) last year.
The VOA article detailed how a U.S. debt through the global economy was eroded, reducing global trade, affecting dollar economies, affecting trade contracts, reducing the dollar’s global reserve currency position. The default will echo.
Back in 2011, the US debt-limit crisis led to the most volatile week for financial markets since 2008, with the stock market trending significantly lower. This resulted in the country’s first credit downgrade in history. Last year, when the government risked defaulting on debt again, Moody’s Analytics estimated stock prices could fall 33 percent, triggering a recession.
An editorial published Sunday by the St. Louis Post-Dispatch, a Missouri-based newspaper, said a US default on its financial obligations “could lead to a global financial recession.” “To even talk about it is the height of political irresponsibility.” – Xinhua

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