The United States government has allowed the national debt to hit “unsustainable” levels.
According to data from Statista, the U.S. national debt is up roughly 25% since President Joe Biden took office, rising from $27.7 trillion in February 2021 to $34.4 trillion in February 2024.
Without intervention, the national debt is growing by $1 trillion every 100 days, which Fed Chair Jerome Powell said “falls squarely in the domain of elected federal policymakers in Congress and the White House.”
“The U.S. federal government’s on an unsustainable fiscal path. And that just means that the debt is growing faster than the economy,” said Powell in an interview with 60 Minutes. “I don’t think that’s at all controversial.”
Although the U.S. government boosted spending during the pandemic to ward off downside risk, Powell told 60 Minutes, “It’s probably time, or past time, to get back to an adult conversation among elected officials about getting the federal government back on a sustainable fiscal path.”
That could be harder said than done. Over the last four years, the U.S. reserve currency has lost roughly 15% of its purchasing power. Therefore, consumers with $100 today have the same purchasing power as $84.75 in early 2021.
Despite Powell and other economists warning of a looming debt crisis, the U.S. Congressional Budget Office (CBO) forecasts that the country’s long-term deficit will reach 166% of Gross Domestic Product in 2054 and remain on track to increase thereafter.
“That mounting debt would slow economic growth, push up interest payments to foreign holders of U.S. debt, and pose significant risks to the fiscal and economic outlook; it could also cause lawmakers to feel more constrained in their policy choices,” the CBO said in its March report.
To better understand the long-term impact of the country’s budget deficit, Bloomberg Economics built a forecast model to assess the fragility of the debt outlook. The results showed that the U.S. government failed to balance its budget in 88% of all cases and that the deficit stayed on the same unsustainable trajectory.
Despite Powell and Treasury Secretary Janet Yellen cautioning the federal government to limit its spending, lawmakers continue to drive the deficit higher.
“We need to be on a fiscally sustainable path, and it’s critical to reduce deficits in order to ensure that that’s the case,” Yellen told the Financial Stability Oversight Council in February.
“The economic damage and unchecked spending done during the Democrats’ control of Washington, which increased costs for the American people and ballooned our national debt, brought us to the stark reality of today,” said House Speaker Mike Johnson (R-LA) in a statement, per The New York Times.
