US debt exceeds $31t amid rising rates

WASHINGTON — The United States' national debt has surpassed $31 trillion for the first time amid higher interest rates, raising concerns about fiscal sustainability.

The total public debt outstanding reached $31.1 trillion on Monday, including $24.3 trillion in debt held by the public and $6.8 trillion in intergovernmental holdings, according to the US Treasury Department's daily treasury statement released on Tuesday.

"This is a new record no one should be proud of," said Maya Mac-Guineas, president of budget watch group Committee for a Responsible Federal Budget, noting that it was only five years ago that the US marked $20 trillion in gross debt.

Just roughly eight months ago, the total public debt outstanding exceeded $30 trillion, hitting a fiscal milestone.

The current federal government's debt limit is about $31.4 trillion, after Congress passed legislation in December to raise the limit and avert a looming debt default.

"In the past 18 months, we've witnessed inflation rise to a 40-year high, interest rates climbing in part to combat this inflation, and several budget-busting pieces of legislation and executive actions," MacGuineas said.

"While much of that new borrowing was necessary to combat COVID, we are now past the most severe challenges of the pandemic, and it is time to budget responsibly — yet, we are still borrowing. We are addicted to debt."

MacGuineas noted that this year alone, President Joe Biden and Congress have approved a combined $1.9 trillion in new borrowing, and Biden has approved $4.9 trillion in new deficits since taking office.

Unsustainable path

The Peter G. Peterson Foundation noted in an article published on Tuesday that $31 trillion is more than the value of the economies of China, Japan, Germany and Britain combined, and amounts to $236,000 of debt per household in the US.

"The coronavirus pandemic rapidly accelerated our fiscal challenges, but we were already on an unsustainable path, with structural drivers that existed long before the pandemic," the foundation said. "America's high and rising debt matters because it threatens our economic future."

MacGuineas also argued that for decades, US lawmakers have chosen to "pass politically easy policies" rather than face the challenges of true governing.

"Our nation faces significant fiscal challenges in the near term. Medicare is only six years from insolvency, and Social Security insolvency is only 12 years away. Yet, policymakers have put forth no plan to put either program on strong fiscal footing," she said.

In a report released in May, the Congressional Budget Office, or CBO, warned that high and rising debt would have significant negative consequences both for the economy and federal budget.

As interest rates rise, federal spending on interest payments, including payments to foreign holders of US debt, would increase substantially, the report noted.

That debt path would also push up borrowing costs for the private sector, which would result in lower business investment and slow the growth of economic output over time, the report said.

The CBO also noted that the likelihood of a fiscal crisis in the US would increase. "Specifically, the risk would rise of investors' losing confidence in the US government's ability to service and repay its debt, causing interest rates to increase abruptly and inflation to spiral upward, or other disruptions," it said.

Xinhua