The debt of the United States, the world’s economic powerhouse, has reached a new milestone: a staggering $34 trillion. The staggering figure, released by the Treasury Department on December 29, marks a trillion-dollar increase in U.S. debt in just three months and represents 125 percent of U.S. gross domestic product.
In the past three years alone, the U.S. debt has ballooned by more than $10 trillion, with interest payments exceeding $1.8 billion per day. This stark reality demonstrates the widening gap between government revenues and expenditures, leading to an unprecedented shutdown. Experts warn that this trend bodes ill for both the economy and national security.
The United States debt-to-GDP ratio currently stands at 125 per cent and is expected to reach a worrying 200 per cent in the coming years. This situation will essentially double the debt burden, with dire consequences for the economy in the future. It is predicted that within a decade, the United States federal Government will spend more on servicing its debt than it does on critical areas such as research and development, infrastructure and education.
What is even more worrisome is that this is happening during a period of relative economic prosperity and low unemployment. Traditionally, in times of economic downturn, the government increases spending to stimulate economic growth. However, the U.S. debt spiral seems unstoppable, even in good times.
The national debt has long been a point of contention between Republicans and Democrats, with both parties responsible for the current predicament. This unsustainable trajectory has already begun to affect the country’s credit rating, with Fitch downgrading its sovereign debt rating to AAA from AAA+ in August and Moody’s warning of a possible downgrade in November. The specter of another debt default looms over the country, reminiscent of the 2008 crisis.
By contrast, Japan’s debt-to-GDP ratio is a staggering 269%, or 2.5 times GDP. This can be attributed to its aging population and correspondingly high social welfare spending. Other developed countries such as Greece (197%), Singapore (165%) and Italy (135%) also have debt burdens exceeding a worrying 100% of their GDP.
The escalating debt crisis in the United States requires immediate attention and a comprehensive solution. Controlling government spending, implementing prudent fiscal policies, and exploring responsible revenue generation are critical steps in addressing this precarious situation. Failure to act decisively could have serious consequences for the country’s economic stability, its global standing and the well-being of its citizens.