The United States is facing a significant challenge in the form of its growing public debt. According to a recent study from the Government Accountability Office, the U.S. debt held by the public is expected to more than double over the next 26 years, reaching what is deemed an “unsustainable” level.
As of September 2023, the debt held by the public stood at $26.2 trillion, roughly equivalent to the U.S. gross domestic product (GDP). This means that the debt is increasing at the same rate as the economy.
Debt held by the public represents all the money that the government owes to individuals and entities outside of the government. While it differs slightly from the overall national debt of $34 trillion, it is generally considered a more relevant measure as it excludes money owed by federal agencies to other government entities.
The GAO predicts that the debt held by the public will climb to a historic high of 108% of GDP by 2028 and could potentially double the GDP by 2050 if spending patterns remain unchanged.
Historically, the U.S. debt reached its peak of 106% of GDP in 1946, following World War II, when it was just 25% in 2000. The debt accumulates when the government spends more than it generates in revenue, leading to borrowing to cover the shortfall. This trend has persisted since 2008, with the federal deficit surpassing $1 trillion annually for the past four years.
The escalating debt poses several potential risks. If investors lose confidence in the government’s creditworthiness and stop purchasing Treasury bonds, it could impact government revenue, leading to extensive tax hikes. This could, in turn, erode workers’ wages, reduce income tax collections, and necessitate further borrowing.
Moreover, as interest payments consume a larger portion of federal spending, the government may be forced to borrow even more or curtail spending on crucial programs like Social Security and Medicare. Interest payments are projected to surpass $1 trillion by 2029, exceeding the likely expenditure on the military that year.
In May, researchers at OpenTheBooks presented testimony to the Senate emphasizing the need to address the escalating debt by curbing expenditure, rather than raising taxes. Various opportunities for reform exist, such as rectifying the over $250 billion in improper payments made annually and tackling significant instances of unemployment benefits fraud.
Despite record-high tax revenues, government debt continues to surge exponentially, prompting concerns about the nation’s financial stability. Former Chairman of the Joint Chiefs of Staff Michael Mullen has previously warned that the national debt poses the most significant threat to U.S. national security.
In conclusion, the looming debt crisis cannot be deferred indefinitely, and policymakers will soon be compelled to address the issue head-on. Failure to do so could have severe repercussions for the country’s economic well-being and security.
This article was syndicated with permission from RealClearWire.
