The gross national debt of the United States exceeded 33 billion dollars for the first time on Monday, providing a stark reminder of the country’s shaky fiscal trajectory at a time when Washington faces the prospect of a government shutdown this month amid another fight over federal spending.
The Treasury Department highlighted the milestone in its daily report detailing the nation’s balance sheet. It came when Congress seemed to be faltering in his efforts to fund the government before the September 30 deadline. Unless Congress can pass a dozen appropriations bills or agree to a short-term extension of federal funding at existing levels, the United States will face its first government shutdown since 2019.
Over the weekend, House Republicans considered a short-term proposal That would cut spending by most federal agencies and resurrect tough Trump-era border initiatives to extend funding through the end of October. But the plan had little hope of breaking the stalemate on Capitol Hill, with Republicans still divided over their demands and Democrats unlikely to support any compromise they reach among themselves.
The debt debate has intensified this year, marked by a prolonged standoff over raising the country’s debt limit.
that fight ended with a bipartisan agreement suspend the debt limit for two years and cut federal spending by $1.5 trillion over a decade, essentially freezing some funds that had been projected to increase next year and then limiting spending to growth of 1 percent in 2025. But the The debt is on track to exceed $50 trillion. by the end of the decade, even after newly approved spending cuts are taken into account, as interest on the debt rises and the cost of the country’s social safety net programs continues to rise.
But curbing the growth of the national debt remains a daunting task.
Some federal spending programs approved during the Biden administration are expected to be more costly than previously anticipated. The Inflation Reduction Act of 2022 was previously estimated to cost around $400 billion over a decade, but according to estimates by the University of Pennsylvania Penn Wharton Budget Model could cost more than $1 trillion thanks to strong demand for the law’s generous clean energy tax credits.
Pandemic-era relief programs still cost the federal government money. The Internal Revenue Service said last week that claims for the Employee Retention Credit, a tax benefit originally projected to cost about $55 billion, have so far cost the federal government $230 billion. The IRS is freeze the program due to fears of fraud and abuse.
At the same time, several of President Biden’s attempts to raise more revenue through tax changes have met resistance.
At the end of 2022, the IRS was delayed by a year a new tax policy That would require users of digital wallets and e-commerce platforms to start reporting small transactions to the agency. The policy was projected to raise about $8 billion in additional tax revenue over a decade.
Last month, the IRS delayed for two years a new provision that will prevent high-income earners from funneling extra money into their 401(k) retirement accounts. The agency described the delay as a “administrative transition period.”
Meanwhile, lobbyists are pushing for loopholes in the new taxes that have been enacted. 15 percent corporate alternative minimum tax was devised to ensure that wealthy businesses could no longer get away with paying single-digit tax rates due to the creative use of deductions. However, many of these companies have been lobbying the Treasury Department, which is currently drafting the rules that will govern the tax, to create exceptions to preserve their most prized deductions. That tax is different from the global minimum tax that most countries except the United States are working to adopt.
The rejection of efforts to raise revenues and cut spending has heightened a sense of alarm among budget watchdog groups who fear a fiscal crisis is approaching.
“As we have seen with the recent growth in inflation and interest rates, the cost of debt can rise suddenly and rapidly,” said Michael A. Peterson, executive director of the Peter G. Peterson Foundation, which promotes fiscal restraint. . “With more than $10 trillion in interest costs over the next decade, this compounding fiscal cycle will only continue to hurt our children and grandchildren.”
Republicans and Democrats in the House and Senate remain divided over the path forward to avoid the near-term problem of a government shutdown, and lawmakers have begun pushing for leaders to start focusing on a stopgap bill. to keep the government running after September. 30.
Republicans have been pushing for cuts as a condition of funding the government, blaming out-of-control spending for the country’s fiscal problems.
“This city is addicted to spending other people’s money,” Rep. Eli Crane, R-Ariz., said on X, formerly Twitter. “Enough is enough.”
But the White House on Monday blamed Republicans for the growing debt burden.
“The increase in debt over the past 20 years was driven overwhelmingly by the trillions spent on Republican tax cuts skewed toward the wealthy and large corporations,” said White House spokesman Michael Kikukawa. “Congressional Republicans want to double down by extending President Trump’s tax cuts and repealing President Biden’s corporate tax reforms.”
A Treasury Department report last week showed that the deficit — the gap between what the United States spends and what it collects through taxes and other revenues — was $1.5 trillion during the first 11 months of the year. fiscal, an increase of 61 percent compared to the same period. A year ago.
In an interview with CNBC on Monday, Treasury Secretary Janet L. Yellen said she was comfortable with the country’s fiscal direction because interest costs as a proportion of the economy remained manageable. However, she suggested it was important to take future expenses into account.
“The president has proposed a series of measures that would reduce our deficits over time while investing in the economy,” Yellen said, “and this is something we should do going forward.”
