Russia (bbabo.net), - Numbers on a special counter of America's national debt, which is installed near Times Square in New York, for the first time in history have crossed the mark of 30 trillion dollars. In terms of each American, it turns out more than 90 thousand dollars.
The US national debt has overcome the next 14-digit mark several years earlier than planned. When the meter was first installed in 1989, the federal government was borrowing $2.7 trillion, 10 times less. The entrepreneur Seymour Durst, who tried to draw attention to this problem, became the author of the idea. In 2008, the numbers on the counter passed the $10 trillion mark, in 2017 - $20 trillion.
America is the absolute world champion in public debt, and it is growing much faster than its economy. In 1980 it was about 34 percent of GNP, in 2000 it was 59 percent, and now it is 128 percent. It is easy to see that the US national debt is not just growing, but growing at an accelerating pace. In recent years, the COVID-19 pandemic has made a big contribution to this. To put out the market fire it ignited, the US turned on the Treasury printing press at full speed, flooding the economy with money. In two years, about $5 trillion was allocated to support the economy, stimulate business, and pay benefits.
However, the pandemic only spurred on the process that was going on before. Moreover, there is no reason to believe that it will slow down or stop yet. Theoretically, the US authorities could curb the growth of public debt by cutting federal spending or raising taxes. But these measures are considered brakes on economic growth. In today's climate of highly polarized politics in the US, both major parties are hesitant to take such unpopular steps.
In words, Republicans are louder calling for a reduction in the budget deficit. But although Republican President Donald Trump promised to solve the problem of public debt, in fact, during the four years of his rule (2017-2021), it grew by $ 7 trillion. The administration of Democrat Joseph Biden does not even try to promise anything in this regard. Over the past year, he has introduced several bills to Congress at an astronomical cost - to support the economy, develop infrastructure, increase social spending.
According to Forbes magazine, if the US national debt continues to increase at the current pace, then by 2029 it will grow to 87 trillion and will amount to more than 277 percent of the country's GNP.
Experts told whether the United States will be able to increase the national debt indefinitely Text: Roman Markelov The US national debt has reached another record high - $ 30 trillion. Financial analysts told Rossiyskaya Gazeta whether the process of increasing public debt is finite and how huge US debts affect the entire global economy.
In the summer of 2019, the US national debt ceiling was temporarily frozen for two years, that is, the government was actually not limited in borrowing. During this time, the national debt has grown from about $22 trillion to $28.4 trillion. On July 31 last year, the period of "freezing" the national debt ceiling ended, and after heated discussions in the US Congress, it was first temporarily raised to $28.9 trillion, and in December last year - to $31.4 trillion.
The US Treasury was actively seeking to raise the debt ceiling, since without it it would not be able to place new issues of government bonds to finance approved government spending, which would lead to a US technical default, says Olga Belenkaya, head of macroeconomic analysis at Finam FG.
Since the end of 2019, the US national debt has increased by almost $7 trillion. This is the result of unprecedented stimulus measures taken by the US authorities to support the population and businesses during the pandemic. In particular, we are talking about several rounds of direct payments to the population, additional unemployment benefits, financial support for small and medium-sized businesses. “They really allowed the American economy to quickly overcome the recession and jump in unemployment caused by the pandemic and related restrictions, however, they significantly worsened US credit metrics and became one of the reasons for record inflation in almost 40 years in the largest economy in the world,” Belenkaya states.
If from 1990 to 2007 the average ratio of the US government debt to GDP fluctuated around 60%, then in 2013 it exceeded 100%, and during the 2020 pandemic, according to the IMF, it "pierced" 130% of GDP. This is higher than post-World War II U.S. debt levels that were previously considered all-time highs. The U.S. fiscal deficit widened from 4.7% in 2019 to a record 15% of GDP in 2020 and only slightly declined from that level in FY 2021 (to 12.4% of GDP).“Of course, such parameters “in normal life” are hardly compatible with the status of the most reliable borrower in the world, which is still perceived by the United States. In addition, the United States is the issuer of one of the few world reserve currencies in which public debt is denominated which is theoretically unlimited, so that the probability of default is practically zero - as long as the dollar remains in this role in the world," emphasizes Belenkaya.
However, the increase in the US government debt is still offset by the extremely low (by historical standards) cost of servicing it, which was ensured by the Fed's zero rate policy and the Fed's direct purchase of government bonds in 2020-2021. This allows the US Treasury to service and refinance the public debt without problems. At the same time, in the long term, given the negative real yields on US government bonds and the beginning tightening of the US Federal Reserve's monetary policy, which may return dollar interest rates to higher values, the situation does not look so good.
“Most likely, when raising the rate, the Fed will have to take into account not only the parameters of inflation and employment, which is directly related to its mandate, but also the level of public debt and US budget deficits, since the growth in US government bond yields up to 3-4% may already become sensitive from the point of view of increasing the cost of servicing the public debt," Belenkaya believes.
In subsequent years, in connection with the completion of anti-crisis support for the American economy, a significant reduction in US budget deficits is expected, however, they may remain above pre-crisis levels, especially given the intentions of the White House to achieve approval of the Build Back Better economic reform plan in the amount of 1.75 trillion dollars ( while its approval is blocked due to dissent even among Democratic senators). In particular, the high level of public debt and inflation raise many questions about the timeliness of new spending in the current situation.
However, in the history of the United States, public debt has not always grown, says Anton Prokudin, chief macroeconomist at Ingosstrakh Investments. "In the 20th century, its growth was associated with the world wars, after which it declined due to tight budget policies and at the same time a rapid increase in GDP, and after 1980, the growth of debt fuels the US economy (this is one of the key components of the "Reaganomics"). Politically unacceptable for the leadership countries to tell their citizens that economic growth is over, and now unemployment will rise, not GDP.The weakening US economy has been fueled by credit resources for many years.If you stop building up household and government debt, economic growth will even be 1.5-2% of GDP in the United States will not. And so far, few people are talking about this, "the expert emphasizes.
According to Prokudin, until 2021, the Fed's money printing did not lead to an acceleration of inflation and, according to the official version, it does not lead to it now. “However, this is not the case. Inflation of 7% is only partly due to gaps in supply chains and the gas crisis, and partly the excess money supply in the economy has begun to work. And this is a very dangerous trend that can develop into permanent high inflation, as in the 1970s "To strangle it, the Fed will have to act tough. This is exactly the kind of actions that the agency is now seeing," he says.
The limits for pumping debt into the economy have not yet been reached, therefore, in general, this system will operate for many more years, Prokudin points out. “But the key factor that will stop the use of credit resources is an irreversible increase in the interest rate. The growth will become irreversible if inflation gets out of control. According to the Fed, represented by its head Jerome Powell, "it seems that low rates are with us for a long time." As soon as this is not the case, the US economic system will roll into a severe crisis, "the economist believes.
According to Prokudin, there is no systematic way to solve the problem of public debt: either it is necessary to pursue a conservative budget policy with a constant budget surplus (at least during economic growth), or this system will fall into defaults, but, judging by low interest rates, this will not happen in current decade.
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