US national-debt load approaching $26-trillion [UPDATE #10]

[MenInG]

The US national-debt load surpassed $22 trillion on Monday, according to the Treasury Department. It's the first time that the total outstanding public debt has topped that threshold.

A little less than $16.2 trillion of that debt was held by the public in the form of Treasurys, while the other $5.8 trillion was intragovernmental holdings.

The amount of debt being accumulated is also accelerating because of recent changes. The budget deficit in fiscal year 2018 (October 2017 to September 2018) hit $779 billion. The deficit measures the amount of revenue the government pulls in minus the government's expenditures.

Additionally, a Treasury report estimated the total amount of debt issued during 2018 topped $1.3 trillion: the largest issuance of new debt since 2010.

The recent acceleration in outstanding debt was driven by two recent legislative changes. The first was the tax-reform law pushed by President Donald Trump and passed by the GOP. The law is projected to add about $1.5 trillion to the debt over the first 10 years it is in effect.

The second was the large, bipartisan budget deal that passed Congress. The combination of slashed tax rates, lowering government revenue, and increased spending adds up to a higher debt load.

Traditionally, economists have warned that the high levels of government debt would cause problems for the US economy as private investment is crowded out by public debt.

But recently, progressive lawmakers, such as Rep. Alexandria Ocasio-Cortez, and some economists have started to latch on to modern monetary theory (MMT), an idea that posits the nominal amount of debt the US holds is not in and of itself an issue.

https://www.businessinsider.com/us-national-debt-tops-22-trillion-first-time-history-2019-2

 

[JaDed]

How were people convinced its not an issue?
I pity the college students of USA , they get stick from Boomers ,have to repay huge loans and deal with much smarter immigrats who r ready to work for a lower pay check without having to deal with college debt.

 

[Bewal Express]

Debt is not such a big problem for the USA because institutions still lend them money at incredibly low interest rates, and they enough Money to pay back the interest and the Principle. And confidence is such that when they do get into serious problems as in 2008, they print money and give it a fancy name like quantitive easing and no one bats an eye lid. But the system will collapse when least expected and then everyone will asking how we got here.

 

[sweep_shot]

WASHINGTON: The Trump administration reported a river of red ink on Friday as the federal deficit for the 2019 budget year surged 26 per cent from 2018 to $984.4 billion - its highest point in seven years. The gap is widely expected to top $1 trillion in the current budget year and likely remain there for the next decade.

The year-over-year widening in the deficit reflected such factors as revenue lost from the 2017 Trump tax cut and a budget deal that added billions in spending for military and domestic programmes.

Forecasts by Trump administration and the Congressional Budget Office project that the deficit will top $1tr in the 2020 budget year, which began Oct. 1. And the CBO estimates that the deficit will stay above $1tr over the next decade.

Those projections stand in contrast to President Donald Trump’s campaign promises that even with revenue lost initially from his tax cuts, he could eliminate the budget deficit with cuts in spending and increased growth generated by the tax cuts.

Here are some questions and answers about the current state of the government’s finances.

WHAT HAPPENED? The deficit has been rising every year for the past four years. It’s a stretch of widening deficits not seen since the early 1980s, when the gap exploded with President Ronald Reagan’s big tax cut.

For 2019, revenues grew 4pc. But spending jumped at twice that rate, reflecting a deal that Trump reached with Congress in early 2018 to boost spending.

WHY DOESN’T WASHINGTON DO SOMETHING ABOUT IT? Fiscal hawks have long warned of the economic dangers of running big government deficits. Yet the apocalypse they fear never seems to happen, and the government just keeps on spending.

There have been numerous attempts by presidents after Reagan to control spending. President George H.W. Bush actually agreed to a tax increase to control deficits when he was in office, breaking his “Read my lips” pledge not to raise taxes.

And a standoff between President Bill Clinton and House Speaker Newt Gingrich did produce a rare string of four years of budget surpluses from 1998 through 2001. In fact, the picture was so bright when George W. Bush took office in 2001 that the Congressional Budget Office projected that the government would run surpluses of $5.6tr over the next decade.

That didn’t happen. The economy slid into a mild recession, Bush pushed through a big tax cut and the war on terrorism sent military spending surging. Then the 2008 financial crisis erupted and triggered a devastating recession. The downturn produced the economy’s first round of trillion-dollar deficits under President Barack Obama and is expected to do so again under Trump.

SHOULD WE WORRY? As far as most of us can tell, the huge deficits don’t seem to threaten the economy or elevate the interest rates we pay on credit cards, mortgages and car loans. And in fact, the huge deficits are coinciding with a period of ultra-low rates rather than the surging borrowing costs that economists had warned would likely occur if government deficits got this high.

There is even a new school of economic theory known as the “modern monetary theory.” It argues that such major economies as the United States and Japan don’t need to worry about running deficits because their central banks can print as much money as they need.

Yet this remains a distinctly minority view among economists. Most still believe that while the huge deficits are not an immediate threat, at some point they will become a big problem. They will crowd out borrowing by consumers and businesses and elevate interest rates to levels that ignite a recession.

What’s more, the interest payments on the deficits become part of a mounting government debt that must be repaid and could depress economic growth in coming years. In fact, even with low rates this year, the government’s interest payments on the debt were one of the fastest growing items in the budget, rising nearly 16pc to $375.6bn.

HAVEN’T ECONOMISTS BEEN MAKING THESE WARNING FOR DECADES? Federal Reserve Chairman Jerome Powell says the day of reckoning is still coming but isn’t here yet. Most analysts think any real solution will involve a combination of higher taxes and cost savings in the government’s huge benefit programmes of Social Security and Medicare.

ANY SIGN THAT WASHINGTON MAY TAKE THE POLITICALLY PAINFUL STEPS TO CUT THE DEFICIT? In short, no. There has been a major change since the first round of trillion-dollar deficits prompted the Tea Party revolt. This shift brought Republicans back into power in the House and incited a round of fighting between GOP congressional leaders and the Obama administration. A result was government shutdowns and near-defaults on the national debt.

But once Trump took office, things changed: The president focused on his biggest legislative achievement, the $1.5tr tax cut passed in 2017. This appeared to satisfy Republican lawmakers and quelled concerns about rising deficits.

Democratic presidential candidates have for the most part pledged to roll back Trump’s tax cuts for corporations and wealthy individuals. But they would use the money not to lower the deficits but for increased spending on expensive programs such as Medicare for All.

SO THE DEFICITS WON’T ANIMATE THE PRESIDENTIAL CAMPAIGN? It doesn’t seem likely, though former Rep. Mark Sanford, who has mounted a long-shot Republican campaign against Trump, is urging Republican voters to return to their historic concerns about the high deficits.

And economists note that today’s huge deficits are occurring when the economy is in a record-long economic expansion. This is unlike the previous stretch of trillion-dollar deficits, which coincided with the worst recession since the 1930s.

But analysts warn that if the economy does go into a recession, the huge deficits projected now will expand significantly possibly to a size that would send interest rates surging. Such a development, if it sparked worries about the stability of the US financial system, might produce the type of deficit crisis they have been warning about for so long.

Source: https://www.dawn.com/news/1513200/us-deficit-hits-nearly-1tr-when-will-it-matter.

 

[Bewal Express]

The ponzi scheme will collapse sooner or later, it nearly did in 2008 and the chaos the ensues will cause wars.

 

[ElRaja]

they can just print money to keep servicing the debt, the principal will never get repaid.

americas debt to gdp was higher after ww2, but the baby boomers and cheap oil drove growth so fast relative levels of debt fell. the real problem is there are no obvious growth drivers for the us economy, which means relative debt levels are likely to remain fairly high.

the flip side of this is that american corporations have a huge amount of unemployed capital on their balance sheets, which unfortunately gets used for share buy backs, etc, rather than capital investment. if american corporations started investing properly gdp growth would see relative levels of debt fall again imo.

 

[Bewal Express]

they can just print money to keep servicing the debt, the principal will never get repaid.

americas debt to gdp was higher after ww2, but the baby boomers and cheap oil drove growth so fast relative levels of debt fell. the real problem is there are no obvious growth drivers for the us economy, which means relative debt levels are likely to remain fairly high.

the flip side of this is that american corporations have a huge amount of unemployed capital on their balance sheets, which unfortunately gets used for share buy backs, etc, rather than capital investment. if american corporations started investing properly gdp growth would see relative levels of debt fall again imo.

Like all ponzi schemes it will continue to be successful as long as the confidence remains in the system.

 

[ElRaja]

Like all ponzi schemes it will continue to be successful as long as the confidence remains in the system.

every one is invested in the ponzi, and those who could say no aren't born yet and will be conditioned to the system by the time they are adults.

 

[Bewal Express]

every one is invested in the ponzi, and those who could say no aren't born yet and will be conditioned to the system by the time they are adults.

True but it will end and take every down with it.

 

[sweep_shot]

US budget deficit soars to $3tn record

The US budget deficit has hit a record high of more than $3tn (£2.3tn), driven by the government's massive spending on coronavirus relief.

The federal government spent more than $6tn in the first 11 months of its financial year, including $2tn on coronavirus programmes, the Treasury Department said.

The figure outpaces the $3tn it took in from taxes.

The shortfall is more than double the previous full-year record, set in 2009.

At the time, Washington was grappling with the aftermath of the 2008 housing financial crisis.

Even before the pandemic, the US was on track to run a deficit of more than $1tn this year - large by historic standards.

But the spending approved to try to cushion the financial impact of the virus has exploded those projections.

The Congressional Budget Office this month predicted that the US was likely to run a full-year deficit of $3.3tn, more than triple the shortfall recorded last year. The federal government's financial year ends in September.

The agency said it expected total US debt to exceed $26tn.

'Unsustainable'
At a hearing in Washington in June, Jerome Powell, the head of the US central bank, told members of Congress that America's spending path was "unsustainable", but said reducing the shortfall should not be a priority given the state of the economy.

The economy shrank at an annual rate of more than 30% in the April-June period, its worst quarterly contraction on record. Data suggest job layoffs and business closures are continuing.

Roughly 30 million people - about 20% of the American workforce - remain on some form of unemployment benefits, despite reopening underway, the Labour Department said this week.

Many conservatives in Washington, however, remain leery of further spending.

Republicans this week put forward a $300bn proposal for more aid. The plan failed to advance, with Democrats saying it fell far short of the more than $3tn in relief they support.

Source: https://www.bbc.com/news/business-54126226.

 

[Angrez Pakistani]

I fairly sure that no power in the world can force US to pay its debts.

 

[CRIC_FANtastic]

They own the printing press, don't they?

 

[Buffet]

Natonal debt of 22T is high, but not really too threatening.

US government owns 20-25% of productivity of nation via tax and they can increase it a bit as well. As long as reasonable growth is present, it's not going to be an issue. Ideally, you don't need to have high debt, but some perspective is needed.

Defaulting on debt is not an issue for US because they hold debt in their own currency. Yes, currency will be devalued , but default is not an outcome with US debt.

Fed trying to have high inflation with all extra money in circulation can create a problem. If inflation gets higher then it may not be possible to bring it down so easily. Volcker had to take drastic steps to bring it down last time. Moderate inflation is fine, but a high inflation is very bad outcome for pretty much everyone.

 

[Bigboii]

Too many playa haters on this thread man

Playa = US

 

[sa88]

Not an issue at all.
Last ten years have shown USA can have all the debt it wants as long as it is denominated in dollars. This is the basic argument of modern monetary theory. Read Stephanie Kelton’s book for a brief overview.
Reason! USA has a monopoly of printing dollars and it has been printing them like no tomorrow since 2009. There’s a big difference between currency issuers and currency users when it comes to debt.
Countries like Pakistan and Argentina (users not issuers of dollars) get into debt trouble because their external debt is in dollars or euros which they can’t make themselves. This doesn’t apply to the USA.

 

[mmkextreme_1]

I fairly sure that no power in the world can force US to pay its debts.

Basically this.

What country in the world is going to force the US government to pay off the debt? The USD is the world's reserve currency. If by any chance our debt defaults, there are going to be much bigger issues to worry about.

All the people that think otherwise are living in a fool's paradise.

 

[Technics 1210]

Basically this.

What country in the world is going to force the US government to pay off the debt? The USD is the world's reserve currency. If by any chance our debt defaults, there are going to be much bigger issues to worry about.

All the people that think otherwise are living in a fool's paradise.

It's actually you who is both foolish and living in the paradise.

No one is going to force the US to pay debt, but this doesn't mean investors must buy US debt or invest in USD

USD is losing its world reserve status; the Russians and Chinese will make sure of this, and USA will not dare go to war against the 2 like they did in the Middle East to protect the Petrodollar.

 

[MenInG]

US budget deficit hits record $3 trillion

The US budget deficit hit an all-time high of $3 trillion for the first 11 months of this budget year, the Treasury Department said, as a result of the government's massive spending to try to cushion the impact of a coronavirus-fuelled recession.

The deficit from October through August is more than double the previous 11-month record of $1.37 trillion set in 2009. At that time the US government was spending large sums to get out of the Great Recession triggered by the 2008 financial crisis.

With one month to go in the 2020 budget year, which ends on September 30, the deficit could go even higher. The Congressional Budget Office is forecasting the deficit this year will hit a record $3.3 trillion.

 

[mmkextreme_1]

It's actually you who is both foolish and living in the paradise.

No one is going to force the US to pay debt, but this doesn't mean investors must buy US debt or invest in USD

USD is losing its world reserve status; the Russians and Chinese will make sure of this, and USA will not dare go to war against the 2 like they did in the Middle East to protect the Petrodollar.

Ok, you keep thinking that.

Russia, a declining world power that is still trying to stay relevant on a global scale.

China, don't see their currency becoming the world's reserve currency anytime soon. Keep living in the lala land that you live in. The dominance of the USD isn't going away anytime soon.

And yes, I know investors don't have to buy US debt, but they do as they know it is a stable currency with the full backing of the US government.

 

[Technics 1210]

Ok, you keep thinking that.

Russia, a declining world power that is still trying to stay relevant on a global scale.

China, don't see their currency becoming the world's reserve currency anytime soon. Keep living in the lala land that you live in. The dominance of the USD isn't going away anytime soon.

And yes, I know investors don't have to buy US debt, but they do as they know it is a stable currency with the full backing of the US government.

More nonsense. The size of an economy is irrelevant. Venezuela, Iraq, and Libya were puny countries but a threat to the USD dominance which is why USA attacks any country that decides to sell oil in another currency than USD. Petrodollar - look it up millenial. You can boot-lick USA all you want, they still don't have the balls to fight Russia/China as they dump the USD.

 

[mmkextreme_1]

More nonsense. The size of an economy is irrelevant. Venezuela, Iraq, and Libya were puny countries but a threat to the USD dominance which is why USA attacks any country that decides to sell oil in another currency than USD. Petrodollar - look it up millenial. You can boot-lick USA all you want, they still don't have the balls to fight Russia/China as they dump the USD.

LOL ok, you can continue believing your conspiracy theories. Good on you. As if Russia/China have the courage to fight the US? Last time I checked, it was the US in the south China sea provoking China and not the other way around.

Besides, don't see any of those 3 countries fighting in the near future. When one is a nuclear armed nation a full pledged war goes out the window imo.

 

[msaaim89]

LOL ok, you can continue believing your conspiracy theories. Good on you. As if Russia/China have the courage to fight the US? Last time I checked, it was the US in the south China sea provoking China and not the other way around.

Besides, don't see any of those 3 countries fighting in the near future. When one is a nuclear armed nation a full pledged war goes out the window imo.

Call it a conspiracy theory but there is some truth to his post regarding mentioned nations.

 

[ElRaja]

its logical for the usa to run a deficit, beyond the settlement of global trade, the dollar is a safe haven for nearly all money moving out of other countries legally or illegally, america simply monetises said demand.

we can go into the intricacies of what drives the demand in another thread, but from a pure supply demand point of view anything other than a massive deficit would drive the dollar price up to levels that would cause the US problems.

 

[daytrader]

Congress close to deal before breaking for holiday, reports say

US President Joe Biden and top Republican Kevin McCarthy appear to be inching closer to an agreement over the US debt ceiling - even as Congress breaks up for a holiday weekend.

The pair are trying to reach a deal on raising the US borrowing limit so the government can keep paying its bills.

Investors' fears of the US defaulting on its debts have grown - despite assurances that talks are progressing.

Mr Biden spoke of "several productive conversations" with Mr McCarthy.

During a White House event on Thursday, the president said his staff remained in conversation with the team of Mr McCarthy, the House speaker - and that the two sides were "making progress".

He added: "I made clear time and again defaulting on our nation debt is not an option." He said Americans deserved certainty over issues such as social security payments.

The debt ceiling is a spending limit set by Congress which determines how much money the government can borrow - an issue on which Democrats and Republicans disagree.

With no deal yet struck, the Treasury has warned that the US will not have enough money to pay all of its bills as soon as 1 June.

Analysts say there could be severe economic consequences if the US fails to honour its obligations.

'Two-year deal'
Details of a potential pact - outlined by Reuters and the New York Times - could allow Republicans to say they cut spending, while Democrats could say they defended domestic programmes.

A US official told Reuters that the White House was considering scaling back an increase of the Internal Revenue Service to hire more auditors, which was intended to target wealthy Americans.

The Times reported negotiators were closing in on a deal that would raise the debt limit for two years while imposing strict caps on spending besides military or veterans for the same period.

Republicans are seeking spending cuts to government programmes, in exchange for raising the $31.4tn (£25tn) cap on government borrowing.

...
https://www.bbc.com/news/world-us-canada-65713732

 

[sweep_shot]

Even if they raise the borrowing limit, they are likely to reach this situation again.

In a nutshell, US economy is crashing day by day.

 

[JaDed]

Even if they raise the borrowing limit, they are likely to reach this situation again.

In a nutshell, US economy is crashing day by day.

Lol they have been reaching this situation since we were born.
Having a ceiling itself is stupid majority countries don’t have it.

 

[KingKhanWC]

This will be the last raise in the debt ceiling. In two years the US $ will only account for around 20% of world trade.

They will then end paper money and introduce a central bank digital currency.

 

[sweep_shot]

Lol they have been reaching this situation since we were born.
Having a ceiling itself is stupid majority countries don’t have it.

Do you support printing money without any ceiling? Ceiling should be there. You cannot and shouldn't indefinitely keep on printing cash out of thin air.

 

[JaDed]

Do you support printing money without any ceiling? Ceiling should be there. You cannot and shouldn't indefinitely keep on printing cash out of thin air.

Except US and Denmark hardly anyones have it though, Americans probably knowing how governments love to spend they kept this ceiling , for a similar reason they didn’t have central bank for the longest time and they will get rid of this limit in future too.

I don’t think ceiling should be there but I do think it should be bound to a percentage of the economy.
Some limitations must be there, the current logic is silly.

 

[daytrader]

US House passes bill to raise debt ceiling just days before default
With 149 Republicans and 165 Democrats supporting the measure, Biden has called on the Senate to quickly take up the legislation

The House passed a bill to raise the debt ceiling on Wednesday, clearing a major legislative hurdle with just days left before the US is expected to default.

The final House vote was 314 to 117, with 149 Republicans and 165 Democrats supporting the measure. In a potentially worrisome sign for the House Republican speaker, Kevin McCarthy, 71 members of his conference opposed the deal that he brokered with President Joe Biden.

Taking a victory lap after the bill’s passage, McCarthy downplayed concerns over divisions within the House Republican conference and celebrated the policy concessions he secured in his negotiations with Biden.

“I have been thinking about this day before my vote for speaker because I knew the debt ceiling was coming. And I wanted to make history. I wanted to do something no other Congress has done,” McCarthy told reporters after the vote. “Tonight, we all made history.”

Biden applauded the House passage of the legislation, calling on the Senate to quickly take up the legislation to avoid a default. The treasury secretary, Janet Yellen, has warned that the federal government will be unable to pay its bills starting 5 June unless the debt ceiling is raised.

“This budget agreement is a bipartisan compromise. Neither side got everything it wanted,” Biden said in a statement. “I have been clear that the only path forward is a bipartisan compromise that can earn the support of both parties. This agreement meets that test.”

...
https://www.theguardian.com/us-news/2023/may/31/debt-ceiling-final-vote-house-congress

 

[daytrader]

US debt ceiling deal narrowly passes senate averting catastrophic federal default
With just days before the 5 June default deadline, president Joe Biden has indicated he will sign the bill as soon as it reaches his desk

The Senate narrowly passed a bill to suspend the debt ceiling on Thursday night, sending the legislation to Joe Biden’s desk and averting a federal default that could have wreaked havoc on the US economy and global markets.

The final vote was 63 to 36, with 46 Democrats and 17 Republicans supporting the bill while five Democrats and 31 Republicans opposed the legislation. Sixty votes were needed to pass the bill.

“Tonight’s vote is a good outcome because Democrats did a very good job taking the worst parts of the Republican plan off the table,” the Senate majority leader, Democrat Chuck Schumer, said after the vote. “And that’s why Dems voted overwhelmingly for this bill, while Republicans certainly in the Senate did not.”

Biden applauded the Senate’s accomplishment and promised to sign the bill as soon as it reaches his desk, with just days to go before the 5 June default deadline.

“Tonight, senators from both parties voted to protect the hard-earned economic progress we have made and prevent a first-ever default by the United States,” Biden said in a statement. “Our work is far from finished, but this agreement is a critical step forward, and a reminder of what’s possible when we act in the best interests of our country.”

...
https://www.theguardian.com/us-news/2023/jun/01/senate-debt-ceiling-vote-thursday-chuck-schumer