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The U.S. government is in a shutdown crisis again!
Sep 20,2023
The size of the US national debt has once again crossed an important milestone at a time when US government spending is already under close scrutiny in Congress.
On September 18, local time, according to data released by the U.S. Treasury Department, the total amount of U.S. Treasury bonds exceeded $33 trillion for the first time that day.
The New York Times reported that the total national debt hit a new high at a time when federal spending is once again controversial and the government is facing a shutdown, and the US fiscal outlook is worrying.
It is reported that if Congress cannot pass a long-term appropriations bill or a short-term spending bill by September 30, the government will face a shutdown crisis.
By contrast, in June this year, the size of US Treasury bonds just exceeded $32 trillion; 40 years ago, the size of US Treasury bonds was around $907 billion.
The US government is in crisis again.
The record high U.S. debt comes as Congress struggles to avoid a government shutdown at the end of September. If Congress fails to pass a long-term funding bill or a short-term spending bill by September 30, the government will face a shutdown crisis.
House Republicans on Sunday night unveiled a short-term plan that would provide temporary funding for the government through Oct. 31.
The short-term measure, known as the "continuing resolution," calls for federal agencies to cut spending by 8 percent, but excludes funding for defense, veterans affairs and disaster relief.
However, at least 10 hardline lawmakers have already announced their opposition to the plan.
They demanded a series of changes, including deeper spending cuts, stopping funding for investigations into former President Trump and blocking spending on previous Ukraine aid programs.
U.S. experts worry that debt hurts U.S. economy
Recently, Fitch, an international rating agency, downgraded the default rating of long-term U.S. foreign currency issuers from AAA to AA, the first downgrade of the U.S. credit rating since Fitch issued the rating in 1994.
According to US media reports, a number of US economic experts said that the US federal government has failed to take seriously the growing fiscal deficit and mountain debt problems, which may further slow down economic growth.
Mark Zandi, chief economist at Moody's Analytics, said the financial impact of the downgrade could be long-term.
If the U.S. government does not enact policies to address long-term debt problems, consumers may face rising borrowing costs for everything from credit cards and mortgages to cars, and investors will be less confident in U.S. debt repayment.
In this regard, the Cato Institute, a US think tank, warned that the increasing scale of US federal government debt will lead to the suppression of private investment and an increase in the risk of sudden fiscal crisis, which has become a "national security" issue for the United States.
Canadian expert: Liquidity of government bonds is a concern
Recently, Radhika Desai, a professor at the University of Manitoba in Canada and a scholar in the field of political economy, published a column on Russian TV Today that there are more problems hidden behind the recent risk of debt default in the United States.
Desai said that given the huge debt of the United States, the United States faces a "larger and more immediate threat", that is, a possible collapse of the US Treasury bond market.
As the ceiling on U.S. Treasury bonds continues to be raised, the world is caught in the illusion that the United States can issue unlimited government bonds. In fact, the liquidity of U.S. Treasury bonds is already worrying.
Desai pointed out that even if the current debt default risk is resolved, the real value of U.S. Treasury bonds after the deadlock and the United States' once "unlimited" borrowing capacity have been questioned.
The article believes that unless there is a major political change to revive the economy, there will be more "dishonorable" problems in US Treasury bonds.
The impact of the rapid expansion of the national debt on the U.S. economy.
Recently, according to the latest budget outlook from the Congressional Budget Office (CBO), the size of the U.S. national debt will nearly double over the next 30 years. At the end of 2022, the U.S. national debt was about 97% of gross domestic product (GDP).
That figure is expected to soar to 181 percent by the end of 2053, and the debt burden will far exceed any previous levels.
Most economic studies have found that excessive public debt slows economic growth, which is dampened when debt reaches about 78% of GDP.
More worryingly, US interest rates have soared over the past year and a half, making it more expensive to service the national debt. Interest payments on the national debt are expected to be the fastest growing part of the federal budget over the next 30 years, according to the CRFB.
Interest payments on the national debt are expected to triple from nearly $475 billion in fiscal year 2022 to a staggering $1.4 trillion by 2032. Interest payments are expected to soar to $5.4 trillion by 2053.
That would exceed what the United States spends on Social Security, Medicare, Medicaid and all other mandatory and discretionary spending items.
"As we have seen recently with increases in inflation and interest rates, the cost of debt could suddenly and rapidly rise." Peter G. Michael Peterson, president and CEO of the Peter G.Peterson Foundation.
"Interest costs will exceed $10 trillion over the next decade, which will only continue to damage our children and grandchildren."
In view of the above, foreign trade companies that have recently traded with the United States should always pay attention to the exchange rate fluctuations of the country, keep in touch with customers, and beware of trade risks.
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