The gross national debt topped $32 trillion for the first time on Friday, underscoring the country’s troubling fiscal record as Washington braces for another spending scramble.
A Treasury Department report marked the milestone weeks after Congress agreed to suspend the nation’s legal debt limit, ending a months-long stalemate.
The $32 trillion mark came nine years earlier than pre-pandemic forecasts had projected, reflecting trillions of dollars of emergency spending to address the impact of Covid-19 coupled with a streak of slow economic growth.
Republicans and Democrats have raised concerns about the nation’s debt, but neither party has shown interest in addressing its main drivers, such as spending on Social Security and Medicare.
The recent bipartisan agreement suspending the debt limit for two years cuts federal spending by $1.5 trillion over a decade, according to the Congressional Budget Office, essentially freezing some funds that had been projected to increase next year and then capping spending. to 1 percent growth in 2025. But debt is on track to top $50 trillion by the end of the decade, even after recently passed spending cuts are factored in.
Mark Zandi, the chief economist at Moody’s Analytics, said during the standoff in May that spending cuts proposed by lawmakers failed to address the costs of social safety net programs. While avoiding a default would prevent an immediate crisis, he said, mounting debt is a persistent problem that must be addressed.
“The nation’s daunting long-term fiscal challenges continue,” Zandi said.
This week, the House Appropriations Committee began considering its next spending bills and, to appease the ultra-conservative wing of the Republican majority, signaled that it would fund federal agencies at levels below what President Biden and President Biden had agreed to. President Kevin McCarthy.
If the House and Senate bills are not passed and reconciled by October 1, it could lead to a government shutdown. And if individual bills don’t pass before the end of the year, an automatic 1 percent cut will take effect.
At the same time, House Republicans began considering a new round of tax cuts this week. The bill would expand the standard deduction for individual taxpayers and some business tax benefits that are intended to promote investment and reduce energy tax credits. The Committee for a Responsible Federal Budget, which advocates for lower spending levels, estimates that the proposed legislation would cost $80 billion over a decade or $1.1 trillion if the measures were made permanent.
Some have called for Congress to form a bipartisan fiscal commission to address the long-term drivers of the national debt.
“As we cross $32 trillion with no end in sight, it is time to address the fundamental drivers of our debt, which are the growth of mandatory spending and the lack of sufficient revenue to finance it,” said Michael A. Peterson, executive director of the Peter G. Peterson Foundation, which promotes deficit reduction.
The Peterson Foundation expressed concern over projections showing the United States will add $127 trillion in debt over the next 30 years and interest costs will eat up nearly 40 percent of all federal revenue by 2053.
Treasury Secretary Janet L. Yellen defended the Biden administration’s handling of the nation’s finances in a House Financial Services Committee hearing this week, noting that the White House had released a budget this year that cuts the deficit by $3 trillion. He also told the panel that interest rates are likely to decline over the medium term, making the debt burden more manageable.
The Treasury Secretary suggested that Republican-led fiscal policies would worsen the fiscal situation.
“They would benefit wealthy individuals and corporations and do nothing for working families,” Ms Yellen said. “It is not paid and would exacerbate the debt.”