The Treasury Department in Washington, DC was founded on February 5, 2022. STEFANI REYNOLDS AFP WASHINGTON - The US national debt has exceeded US$3 trillion for the first time amid higher interest rates, raising concerns about fiscal sustainability.
The US Treasury Department said on Monday that the total debt outstanding reached US $31.1 trillion, including US $24.3 trillion in debt held by the public and US $6.8 trillion in intergovernmental holdings.
Maya MacGuineas, president of budget watch group The Committee for a Responsible Federal Budget, said this is a new record no one should be proud of and said it was only five years ago that the United States had $20 trillion in gross debt.
Just about eight months ago, the total debt outstanding exceeded US $30 trillion, hitting a fiscal milestone.
ALSO READ: US national debt surpasses $30 t as Fed prepares to raise rates.
After the US Congress passed legislation in December last year to raise the limit to prevent a looming debt default, the current federal debt limit is about US $31.4 trillion.
In the past 18 months, we've seen inflation rise to a 40 year high, interest rates climbing in part to combat this inflation, and several budget-busting pieces of legislation and executive actions, said MacGuineas.
She said that while much of the new borrowing was necessary to combat COVID, we are now past the most severe challenges of the pandemic and it is time to budget responsibly. We are addicted to debt. In 2022 alone, the US Congress and President Joe Biden approved a combined US $1.9 trillion in new borrowing, and Biden has approved $4.9 trillion in new deficits since taking office.
In an article published Tuesday, the Peter G. Peterson Foundation stated that US $31 trillion is more than the value of the economies of China, Japan, Germany and Britain and amounts to US $236,000 of debt per household in the United States.
ALSO READ: US needs more investment, not relief bills, to revive economy.
The foundation said that the coronaviruses accelerated our fiscal challenges, but we were already on an unsustainable path, with structural drivers that existed long before the epidemic. MacGuineas also argued that US lawmakers have chosen to pass politically easy policies rather than face the challenges of true governing for decades.
Medicare is only six years from insolvency, and Social Security insolvency is only 12 years away. Policymakers have put forth no plan to put both programs on strong fiscal footing, said MacGuineas.
In a report released in May, the Congressional Budget Office CBO warned that high and rising debt would have negative consequences for both the economy and the federal budget.
READ MORE: Fed delivers another big rate hike, Powell vows to 'keep at it' and Powell promises to 'keep at it'.
The report noted that as interest rates increase, federal spending on interest payments, including payments to foreign holders of US debt, would increase.
The report said that the debt path would lead to lower business investment and slowing the growth of economic output over time.
The CBO also noted that the likelihood of a fiscal crisis in the United States would increase.
It said that the risk would increase because investors would lose confidence in the US government's ability to service and repay its debt, and cause interest rates to increase abruptly and inflation to spiral upward, or other disruptions.