U.S. Debt Breaches $30 Trillion Mark For The First Time
For the first time, the U.S. national debt exceeded $30 trillion, owing to increased federal borrowing during the COVID-19 pandemic.
As of Jan. 31, the total outstanding public debt was $30.1 trillion, according to Treasury Department data released Tuesday. This was an increase of nearly $7 trillion from late January 2020, just before the global health crisis struck the U.S. economy.
It is impossible to determine how much debt is excessive, and economists continue to disagree on the magnitude of the problem. However, the latest debt milestone comes at a perilous time for the economy, as borrowing costs are expected to increase.
The announcement comes as the Federal Reserve is expected to begin raising interest rates as early as next month in order to rein in inflation and cool an overheating economy beset by supply and demand disparities.
The central bank's likely move will be the first since 2015 and will automatically increase the cost of borrowing for the U.S. to finance its debt.
Both monetary and fiscal stimulus have been ramped up significantly during the two-year-old pandemic. As of December, approximately 80% of all U.S. currenin circulation had been printed within the preceding 22 months. The debt ballooned to $20 trillion in October 2021, from $4 trillion in January 2020.
Following several months of expediting monetary easing, or big asset purchases that infuse trillions of dollars into the country's economy, Federal Reserve Chair Jerome Powell noted last week that the Fed will begin offloading its balance sheet and overturning its accommodative monetary stance.
The previous administration also contributed to the growing debt by orchestrating the 2017 Tax Cuts and Jobs Act, which the Tax Policy Center estimates will append between $1 trillion and $2 trillion to the national debt between 2018 and 2025.
But the Biden administration was responsible for a period of unprecedented government spending. With a debt-to-gross domestic product ratio of 130.65%, the country's gross debt far exceeds its economic output.
The federal government owes foreign and international investors nearly $8 trillion. China and Japan are America's biggest creditors, with the former holding 1.05 trillion U.S. dollars in American securities and Japan holding $1.3 trillion.
A congressional debate over raising the debt ceiling erupted in October, threatening a possible debt default emergency situation.
To avoid being complicit in funding the Democrat-sponsored $1 trillion infrastructure bill and even larger social spending program known as Build Back Better, Republican lawmakers opposed raising the debt ceiling on principle.
In the end, the Senate reached an agreement on a short-term debt ceiling extension.