America’s gross national debt surpassed $33 trillion for the first time on Monday. The government could shut down this month amid another fight over federal spending, according to The New York Times.
The Finance Ministry noted the amount of debt in its daily report, providing a detailed description of the country’s balance sheet.
The rise in debt was allegedly due to Congress failing to fund the government ahead of the 30 September deadline. If Congress fails to act, the US will be forced to shut down the government as it has done in 2019.
Over the weekend, House Republicans considered a short-term proposal. It would cut spending across most federal agencies and bring back Donald Trump’s border initiatives to extend funding through the end of October.
However, the plan may remain unimplemented because of the ambiguous position of the Republicans. Democrats are unlikely to support any compromise the counterparts reach among themselves.
The debate over the debt this year has escalated into a prolonged standoff over raising the country’s borrowing limit.
Their fight ended with a bipartisan agreement to suspend the debt limit for two years. But the debt is close to surpassing $50 trillion by the end of the decade, even after recently enacted spending cuts are taken into account. This is due to the fact that the interest on the debt is rising and the cost of national social protection programmes continues to grow.
Despite the measures under discussion, slowing down the growth of public debt remains a challenge.
It is expected that some federal spending programmes adopted under the Biden administration will be more expensive than previously calculated. For example, the Inflation Reduction Act of 2022 was supposed to cost about $400 billion over ten years. However, the University of Pennsylvania’s Penn Wharton Budget Model estimates that it could cost more than $1 trillion. The increase is due to high demand for the law’s generous clean energy tax credits.
Pandemic relief programmes are still taking a toll on the federal budget. The Internal Revenue Service said last week that employee retention credit claims, tax breaks, initially projected to cost about $55 billion, have so far cost the federal government $230 billion.
At the end of 2022, the IRS delayed by one year the introduction of a new tax policy. It would require users of digital wallets and e-commerce platforms to start reporting small transactions to the agency. Such policy is expected to generate about $8 billion in additional tax revenue over a decade.
Treasury Secretary Janet L. Yellen told CNBC on Monday that she supported the country’s fiscal course as the government still controlled interest costs. However, she reminded how important it is to be mindful of future spending.
The president has proposed a series of measures that would reduce our deficits over time while investing in the economy. And this is something we need to do going forward.
