Washington, July 30 (Xinhua) -- "Economic growth cannot keep up with the expansion of debt," "the heavy burden on future generations," and "United States is heading for bankruptcy...... Amid concerns from all walks of life, the scale of United States federal government debt has broken through another psychological threshold: the latest data released by the United States Treasury Department on the 29th shows that the total US debt reached $35 trillion for the first time, equivalent to the total economic output of China, Germany, Japan, India and United Kingdom.
The reporter combed through the historical context of U.S. debt and found that United States relied on the hegemony of the dollar to borrow and became addicted to borrowing, and the scale of debt soared on an "unsustainable path" driven by the connivance of the failed political system and dysfunctional economic governance, constantly eating itself and poisoning the world. Some economists and historians worry that the current level of United States debt has exceeded many dangerous indicators, laying a hidden danger for the future of United States and the world.
Debt "soaring" interest is staggering
"United States must sustain economic growth to pay its debts, or risk passing on enormous, unbearable burdens to future generations." Larry · Fink, CEO of global asset management giant BlackRock, recently commented on the risk of U.S. bonds.
In recent years, the United States economy and debt have shown a clear contrast: overall economic growth has continued to be sluggish, but overall debt levels have accelerated.
The United States government has borrowed heavily since the 80s of the 20th century. In 1985, the United States went from a net creditor to a net debtor, and since then the scale of debt has continued to rise, and in recent years it has shown a rapid growth trend. It exceeded $20 trillion in September 2017 and $30 trillion at the end of January 2022.
Since June 2023, the U.S. debt has soared at a rate of about $1 trillion per 100 days: in June 2023, the size of federal government debt exceeded $32 trillion, nine years earlier than the pre-pandemic projection; In September 2023, the scale of U.S. debt exceeded $33 trillion; In December 2023, this figure reached $34 trillion, five years ahead of the January 2020 projection of the United States Congressional Budget Office.
The rapid increase in the size of the United States national debt has directly led to a corresponding increase in interest payments in the future. Interest payments on the Treasury bond are expected to be the fastest-growing part of the federal budget over the next 30 years, according to the data.
According to projections from the United States Congressional Budget Office, interest payments on United States Treasuries will triple to more than $1.4 trillion by 2033, up from nearly $475 billion in 2022. Interest payments on United States Treasuries are expected to soar to $5.4 trillion by 2053. This will exceed United States spending on Social Security, Medicare, Medicaid and other programs.
Behind the soaring US debt and huge interest rates is the United States economy, which is out of touch with reality. On the one hand, some official economic data and market performance in the United States are "outstanding"; On the other hand, high debt, high interest rates and high prices are historically rare. The outstanding contradictions in the economic field pose a severe challenge to the governance of the United States economy.
The Wall Street Journal wrote that since the Biden administration took office, prices have risen by 20%, and wage increases have not kept pace with the price surge. This, combined with the shift in the way people live and work due to the pandemic, as well as increasing polarization, has created a general sense of instability.
With the size of the U.S. debt exceeding $35 trillion, this issue has become the focus of public opinion in United States. United States Federal Reserve Chairman Jerome · Powell said it was time to talk about the issue "as an adult."
Who is to blame for the "most predictable crisis"?
"United States is heading for bankruptcy." This is Musk's latest assessment of the US debt problem.
United States many chaotic situations in the economic and financial fields have been criticized by the outside world, and debt is one of the problems with the clearest path and the most intuitive consequences. JPMorgan Chase CEO Jamie · Dimon called United States' public debt the "most predictable" crisis facing the United States economy.
In the early '80s, the Reagan administration's massive tax cuts led to an unprecedented peacetime budget deficit in the United States government, and federal debt began to climb rapidly. During the Clinton administration, the United States briefly achieved a federal government budget surplus through a tight fiscal policy, but since then, the government budget and federal debt issues have been further politicized, and debt has increasingly become a "bargaining chip" rather than a "problem", and the Democratic and Republican parties have been playing for this to this day.
Analysts have pointed out that the US debt is out of control, and the Democratic and Republican parties cannot escape the blame. Both parties are reluctant to put the brakes on this because of political considerations, especially in the context of a presidential election, and it is even less likely that they will introduce actual policies to cut spending and control debt. The New York Times noted that United States Vice President Kamala Harris, who has largely locked in the Democratic presidential nomination, and former President Trump, the Republican presidential candidate, rarely talked about debt in their campaigns, and both parties opposed cutting Social Security and Medicare, which are the biggest drivers of debt, suggesting that the debt problem will only worsen in the coming years.
Barry · Bosworth, a senior fellow at the Brookings Institution in United States, believes that neither party has plans to stabilize future budget positions.
United Kingdom "The Economist" magazine recently published an article saying that no matter who wins the United States presidential election in November, United States's fiscal situation may deteriorate further in the next four years, and neither the Democrats nor the Republicans have a realistic plan to solve this problem.
Runaway debt puts United States on a 'dangerous track'
United States continues to borrow new debts to pay off old debts, and its "confidence" comes from the hegemony of the dollar. With the hegemony of the dollar, the United States has passed on its own risks and harvested global wealth through rising and falling interest rates. However, the long-term debt addiction has made the United States unable to get rid of the profligacy of "eating grain", thus sowing the seeds of crisis. Economists and historians believe that the emergence of some new dangerous indicators in the US Treasury data may further impact United States financial hegemony.
At the current level of interest rates, the United States federal treasury will pay up to $870 billion in interest on national debt in 2024, exceeding military spending for the first time, and the total interest will exceed a trillion dollars next year.
Nial · Ferguson, a professor of history at Harvard University in United States, said in a recent article that historically, any major country will not remain strong for a long time as long as its debt service costs exceed defense spending. "This is true of Habsburg Spain, of the Ancien Régime France, of the Ottoman Empire, of the British Empire. Starting this year, United States will be put to the test of this law. ”
With United States national debt approaching $35 trillion, JPMorgan analysts said in a new memo to investors that growing debt and deficits will limit United States' "fiscal flexibility" and limit the government's ability to cope with future recessions, United States media reported. There are potential risks to United States' ballooning deficits and high sovereign debt levels. Investors should not expect any significant improvement in the fiscal outlook for the United States in the near term.
JPMorgan Chase CEO Dimon said United States should pay more attention to the fiscal deficit because it will have an impact on the whole world and "there will be problems one day."
Debt is a matter of national creditworthiness, and out-of-control debt has led more and more countries and institutions to re-examine the status of the US dollar as the world's main reserve currency and re-examine the image of United States as a trustworthy borrower. The sovereign credit rating of United States, which has long been ranked at the highest level, has been "downgraded" by international rating agencies several times over the past 10 years. In August last year, international rating agency Fitch downgraded United States' long-term foreign currency issuer default rating from AAA to AA+ due to "continued deterioration in governance".
Desmond ·Rahman, an economist at the United States Enterprise Institute, said that United States "dangerous track" of public finances poses serious problems for the dollar and the long-term inflation outlook. If, at some point in the future, foreign investors believe that the United States government has no real will to control its debt, they may no longer be willing to fund the United States government, which will lead to a dollar crisis.