“The United States’s national debt exceeded $30 trillion for the first time, according to Treasury Department figures released on Tuesday. The national debt is now about double China’s entire gross domestic product,” reports the Washington Examiner:
News that the U.S. has crossed the $30 trillion threshold comes as the Federal Reserve unwinds its ultraloose monetary policies and prepares to raise the federal funds rate for the first time in years to combat soaring inflation.
Increased borrowing costs would make it even more difficult to finance the debt.
“It doesn’t mean a short-term crisis, but it does mean we are going to be poorer in the long term,” David Kelly, chief global strategist at JPMorgan Asset Management, told CNN. The U.S. owes a lot of its debt to foreign investors, particularly China and Japan.
“That means American taxpayers will be paying for the retirement of the people in China and Japan, who are our creditors,” Kelly said.
During a meeting last week, top central bank officials indicated that the first in a series of interest rate hikes will likely come in March. Investors are pricing in several rate hikes this year, which could bring the federal funds rate to a range of 1-1.25%.
The national debt is bigger than our entire economy. It is at dangerously high levels, higher than most heavily-indebted nations as a share of our economy. The government spent vast amounts of money to temporarily prop up the economy, but did so in ways that have begun to undermine it.
Biden’s stimulus spending, which added trillions to the national debt, harmed the economy’s long-run health by discouraging hard work.
Economists had expected that the economy would add more than a million jobs in April 2021, because it had been growing rapidly since fall 2020. But after Congress passed Biden’s $1.9 trillion “American Rescue Plan” in early March, employment grew by far less than expected, resulting in 700,000 fewer jobs.
Biden’s American Rescue Plan contained provisions that reduce economic growth by encouraging some people to work less and earn less money. It withheld some people’s $1400 stimulus payments if they earned even a little bit more money. It gutted welfare reform, giving people welfare even when they could work. And it gave some people more money in unemployment benefits than they would get by working. The payment structure of Biden’s “American Rescue Plan” created “high marginal tax rates and disincentives to work” for some taxpayers, according to analysts at the Tax Foundation.