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The U.S. national debt has surpassed $34 trillion for the first time, the Treasury Department said on Tuesday, as persistently high annual deficits continue to weigh on the national debt.
About three months after the debt hit $33 trillion for the first time, the new milestone comes as lawmakers prepare for a fiscal showdown over spending levels in the new year. The Federal Reserve's interest rate hike campaign has seen the government's borrowing costs rise, spending remain above pre-coronavirus levels and tax revenues decline last year – all worsening the country's fiscal outlook.
The US deficit is exploding even as the economy grows
The $34 trillion in total debt recorded at the end of last week represents an increase of more than $2 trillion from the roughly $31.4 trillion at the start of last year. On the danger posed by the federal debt, However, economists disagree strongly. Some experts argue that the spate of red numbers poses a threat to the country's overall fiscal position, while others argue that the federal government has sufficient capacity to borrow without risking an economic crisis. The economy has grown rapidly in recent quarters, making the rise in debt less significant as the money borrowed accounts for a smaller share of the country's economic output.
Congress will return from its holiday recess next week — just in time to address federal spending bills that expire Jan. 19 and Feb. 2 and that could lead to at least partial government shutdowns if lawmakers don't pass extensions.
The government shutdown in January is looming as Congress prepares to head home
President Biden blames the GOP tax cuts for adding trillions to the deficit, while Republicans in Congress blame spending measures passed under Biden and other Democrats. In a statement Tuesday, White House spokesman Michael Kikukawa said Republicans in Congress “want to double down on MAGAnomics by doling out more than $3 trillion in giveaways to the wealthy while forcing hard-working Americans to do the same.” Price to pay by cutting Social Security, Medicare and Medicaid.”
“Reaching $34 trillion is another reminder of how unsustainable our fiscal position is. We are adding $2 trillion to our debt every year while unemployment is near record lows,” said Marc Goldwein, senior vice president at the Committee for a Responsible Federal Budget, a Washington-based think tank. “If we increase debt so much in good times, things can get really bad in bad times, and we can't let our debt grow faster than our economy forever.”
The rise in federal debt could shape upcoming debates over the 2017 GOP tax cut, as many provisions of that legislation are set to expire in 2025. Bobby Kogan, an analyst at the Center for American Progress, a center-left think tank, has found that the tax cuts under Presidents George W. Bush and Donald Trump and their subsequent bipartisan extensions have so far reduced the national debt by $10 trillion have increased.
“It's important to put the debt numbers in context: the economy is growing, it's strong, and we need to look at it relative to our resources,” said Claudia Sahm, a researcher at the Federal Reserve. “This is not a sign of an impending crisis – perhaps something we need to deal with, but we are not in a debt crisis.”