The total U.S. national debt reached a new high, surpassing the all-time mark of $34 trillion.
Behind this figure is the concentrated outbreak of deep-seated contradictions in the US economy, indicating that the US will face difficult debt and fiscal difficulties in the coming period. Addressing this challenge will require the U.S. government to adopt responsible fiscal policies and advance structural reforms to control debt growth and gradually restore fiscal sustainability.
During the Reagan era in the 80s, the United States implemented large-scale tax cuts and increased military spending, resulting in a large fiscal deficit.
In the following decades, the balance of the US national debt fell somewhat after the end of the Cold War, but after the 911 incident, the Bush administration once again adopted the practice of cutting taxes and increasing military spending in response to the anti-terrorism and wars in Afghanistan and Iraq, resulting in a wave of relatively large deficits.
After the 2008 financial crisis, the Obama administration launched an economic stimulus package of nearly $800 billion, and the balance of the national debt soared again. After Trump took office, he continued to implement tax cuts to stimulate economic growth, but the effect of tax cuts was limited, and the national debt continued to increase.
During the epidemic in 2020, the Trump and Biden administrations successively launched various stimulus and support packages totaling more than $5 trillion, which directly led to the US national debt exceeding the 30 trillion mark.
On January 2, 2024, the amount of $34 trillion in national debt is already seriously beyond the capacity of the US economy. The main reason is that the United States has long been engaged in large-scale fiscal spending and tax breaks, while maintaining a large trade deficit for a long time. This has led directly to a situation in which the deficit remains high and the debt is getting bigger and bigger.
During the epidemic, the United States launched dozens of trillions of dollars in stimulus plans, which further outstretched the growth rate of national debt.
At present, the US Treasury mainly relies on the issuance of additional bonds for financing, which not only increases the fiscal burden, but also hollows out the future fiscal space. According to budget data, interest payments in the United States already account for more than 7% of fiscal spending, and this interest gift will only get heavier.
At the same time, the proportion of foreign holdings of U.S. bonds is also declining, and it is doubtful whether there will be enough room for U.S. bonds in the international market in the future.
For a long time, in response to various shocks, the United States has chosen to stimulate the economy by cutting taxes and borrowing debt, which has directly led to the continuous accumulation and expansion of the national debt. The United States is now facing the consequences of this approach, and strong measures must be taken to curb the soaring debt.
If debt growth is not curbed soon, the United States will face a credit and fiscal crisis. This would not only trigger financial turmoil, but would also weaken the U.S. fiscal arsenal to deal with external shocks. To truly solve this dilemma, the United States must take decisive measures, such as raising tax rates, cutting unnecessary spending, and raising interest rates, to fundamentally reduce the deficit and balance the balance of payments.
At the same time, structural reforms are urgent. The United States needs to accelerate industrial upgrading, restore manufacturing strength, and reduce the long-standing trade deficit. Rational trade and industrial policies are also an important part of curbing the debt crisis. We see that the United States is facing a historic fiscal inflection point, and it will also usher in a painful structural adjustment.
Looking ahead, the U.S. government must respond cautiously and adopt prudent fiscal policy to weather this storm and rebuild its economic strength.