In a first, America's national debt crosses $30 trillion. Here's why it matters
The latest debt milestone comes at a delicate time of transition for the US fiscal and monetary policy.
In a new milestone, America's national debt has reached a record high of over $30 trillion, according to data published on Tuesday by the treasury department under the US government. Financial experts cited by American media outlets like CNN and Axios remain divided over “how much debt is too much” and regarding how big of a problem this really is for the country, but all of them agree on one thing – the latest debt milestone comes at a delicate time of transition for the US fiscal and monetary policy when borrowing costs are expected to rise and bring broader impacts on the economy.
US treasury department data showed that the total public debt outstanding – as of January 31 – was $30.1 trillion, nearly a $7 trillion rise from the amount that the country owed to its lenders in late January 2020, just before the pandemic hit the economy.
There are a number of reasons behind Washington's skyrocketing pile of both public and intragovernmental debt – one of them being increased government spending amid the coronavirus disease (Covid-19) pandemic. It was during this period (since the end of 2019) that the federal government, according to CNN, borrowed close to $7 trillion from foreign investors led by Japan and China, which will eventually need to be paid back.
Another reason cited by US financial experts is the gradual stockpiling of national debt since the 2008 financial crisis, preceding the pandemic by nearly a decade.
In December 2007, just when the global economic decline known as the Great Recession was beginning, America's national debt outstanding stood at $9.2 trillion. By the time Donald Trump took office as the President of the United States, the country's national debt had reached as much as $20 trillion, reported CNN.
According to Tax Policy Center, the revenue losses from tax cuts under the Tax Cuts and Jobs Act (TCJA) enacted by the erstwhile Trump government in 2017 will add an estimated $1-2 trillion in federal debt between 2018 and 2025, with the increasing deficits potentially exacerbated several degrees by the pandemic.
During the Biden regime, too, Congress authorised trillions of dollars in pandemic programmes in support of small businesses, unemployed workers and their families, and other groups.
Meanwhile, The Wall Street Journal reports that the US federal reserve might soon begin to raise short-term interest rates from near zero in an effort to curb inflation, which is at its highest level in nearly four decades.
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