The country’s debt-to-income ratio has pushed the nation’s debt to $35 trillion for the very first time in history in the face of record inflation, increasing rates of interest, and the fear of a recession.
The United States public debt stood at $31.1 trillion last Monday as per Treasury Department data published Tuesday. The record-breaking figure comes in the midst of a time when the Federal Reserve continues to hike rates of interest to combat the biggest inflation increase in the last 40 years and the federal government continues to take on loans to combat the spread of the pandemic as well as pay for tax breaks to finance the economy.
“So many of the concerns we’ve had about our growing debt path are starting to show themselves as we both grow our debt and grow our rates of interest,” said Michael Peterson, chief executive officer of the Peterson Foundation, which promotes deficit reduction. “Too many people were complacent about our debt path in part because rates were so low.”
The nation’s debt has increased by almost $8 trillion since the outbreak of the disease and has risen another trillion in the last eight months according to Treasury data.
The United States has borrowed more over the last 10 years than at any time in the past. At the time that former president Barack Obama took office in 2009, the nation’s debt was $10.6 trillion. This was $19.9 trillion when then-President Trump became president in 2017 and increased to nearly $28 trillion when Biden was inaugurated the following year, as per the Treasury Department.
“Excessive borrowing will lead to continued inflationary pressures, drive the national debt to a new record as soon as 2030, and triple federal interest payments over the next decade — or even sooner if interest rates go up faster or by more than expected,” the Committee for a Responsible Federal Budget has written.
It is estimated that the Biden administration “enacted policies through legislation and executive actions that will add more than $4.8 trillion to deficits between 2021 and 2031,” according to the CRFB which emphasized the Inflation Reduction Act, the Bipartisan Infrastructure Law Student Debt Relief, the American Rescue Plan for COVID-19 relief, and assistance to Ukraine.
“The $4.8 trillion of borrowing approved by the Biden administration is less than the roughly $7.5 trillion President Trump added to the deficit over his term but much more than the $2.5 trillion President Trump had enacted at this point in his term,” the CRFB said.
The Fed continues to increase costs of borrowing following the drop of rates close to zero during the epidemic. Rates are currently closing to 3.25 percent, and they could be higher, adding $1 trillion to the amount that the federal government pays for interest payments in the next decade as per Peterson Foundation estimates.
On Monday, it was reported that the United Nations demanded the United States as well as other wealthy countries to stop raising interest rates, or else risk an economic recession across the world that could affect the poorest countries the most.
“I don’t know where interest rates are going, but whatever you thought a year ago, you definitely have to revise that,” Harvard economist Jason Furman told The New York Times. “The deficit path is almost certainly too high. We were sort of at the edge of ‘OK’ before. We are past ‘OK’ now.”