NEWS AFFAIRS 7 : WHERE EVERY STORY HAS IT'S AFFAIR!
Last updated on July 27th, 2024 at 11:56 am
The US federal debt is now stands at $34.5 trillion
Government debt in the United States has surged by nearly 50% since the start of the Covid-19 pandemic, causing significant worry both on Wall Street and in Washington. The federal debt now stands at $34.5 trillion, which is approximately $11 trillion higher than its level in March 2020. This represents over 120% of the total U.S. economy.
Concerns regarding these staggering numbers have not only been limited to political debates but have also caught the attention of government officials and financial experts. There are worries that the increasing debt could pose risks to the stock market.
Federal Reserve Chair Jerome Powell has emphasized the need to address the structural deficits, urging elected officials to take action sooner rather than later. The Congressional Budget Office (CBO) has provided alarming forecasts, projecting that the debt held by the public will reach 116% of GDP over the next decade, an unprecedented level in U.S. history.
| Indicator | Current | Projected (10 years) |
|---|---|---|
| Debt held by the public (% of GDP) | 99% | 116% |
| Total deficit (% of GDP) | 5.6% | 6.1% |
The surging budget deficits have been the primary driver of this increasing debt, with the Congressional Budget Office ( CBO ) anticipating a deficit of $1.6 trillion in fiscal 2024, which is expected to rise to $2.6 trillion by 2034. Such high deficit levels have historically been associated with times of economic downturns rather than periods of prosperity.
Financial Leaders Concerns
Financial leaders, including JPMorgan Chase CEO Jamie Dimon and Bridgewater Associates founder Ray Dalio, have expressed concerns about the long-term implications of the escalating debt levels. Dimon emphasized the importance of addressing fiscal deficit issues promptly to avoid potential future problems.
While foreign holdings of U.S. federal debt remain high, there are concerns that rising bond yields could impact equity markets. Analysts worry that unless fiscal policies are reined in, rising interest costs could crowd out other government spending.
| Indicator | Current Fiscal Year |
|---|---|
| Net interest on the debt ($ billion) | $516 billion |
The Federal Reserve’s interest rate hikes have further complicated the debt situation. Despite efforts to curb spending, debt levels have continued to rise, exacerbated by the Covid-19 pandemic.
The outcome of the presidential election could influence the medium-term fiscal outlook, with potential changes in tax policies depending on the winning party. However, the primary challenge remains addressing spending on Social Security and Medicare, which appears unlikely under any election scenario.
Summary
In summary, the escalating government debt in the United States has raised significant concerns among policymakers and financial experts alike. Addressing these challenges will require concerted efforts to rein in deficits and ensure sustainable fiscal policies for the future.
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