The United States has reached a significant fiscal milestone as its gross national debt exceeds $33 trillion for the first time. This serves as a stark reminder of the country’s precarious fiscal trajectory, especially as Congress faces the possibility of a government shutdown in the coming month due to another fight over federal spending.
The Treasury Department highlighted this milestone in its daily report on the nation’s balance sheet. Meanwhile, Congress seems to be struggling to secure funding for the government before the September 30 deadline. Without passing appropriations bills or agreeing to a short-term extension of federal funding at current levels, the US will face its first government shutdown since 2019.
In an attempt to avoid a shutdown, House Republicans have proposed a short-term plan that includes spending cuts for most federal agencies. However, this plan is unlikely to break the impasse on Capitol Hill, with Republicans divided on their demands and Democrats unlikely to support any compromise reached among the Republicans.
The debate surrounding the national debt has intensified this year, particularly due to the extended standoff over raising the nation’s borrowing cap. Although a bipartisan agreement was eventually reached to suspend the debt limit for two years and cut federal spending by $1.5 trillion over a decade, the debt is still projected to exceed $50 trillion by the end of the decade. This is due to growing interest on the debt and the increasing costs of social safety net programs.
Efforts to curb the growth of the national debt have proven challenging. Certain spending programs implemented during the Biden administration have turned out to be more expensive than initially estimated. Additionally, pandemic-era relief programs continue to cost the federal government money. For example, the Employee Retention Credit has exceeded its projected cost by nearly four times.
Meanwhile, attempts by President Biden to generate more revenue through tax changes have met resistance. The implementation of a new tax policy requiring the reporting of small transactions was delayed by the IRS, along with a provision that would prevent high earners from funneling extra money into their retirement accounts.
Lobbyists are also seeking loopholes in new taxes enacted, such as the corporate alternative minimum tax. These efforts to raise revenue and cut spending have alarmed budget watchdog groups, raising concerns about an impending fiscal crisis.
Despite the mounting red ink, lawmakers in the House and Senate remain divided on how to avoid a government shutdown. The Treasury Department’s recent report revealed a deficit of $1.5 trillion for the first 11 months of the fiscal year, representing a significant increase compared to the previous year.
Treasury Secretary Janet L. Yellen expressed comfort with the nation’s fiscal course, citing manageable interest costs. However, she emphasized the importance of being mindful of future spending and highlighted President Biden’s proposed measures to reduce deficits while investing in the economy.
Sources: The New York Times