The national debt of United States returns to the center of international observations, due to its dynamics, the dimensions it has reached and the imminent deadlines. The US Treasury Department announced that the Stars and Stripes debt has exceeded for the first time the 34.000 billions of dollars, with a surge of 1.000 billion in the last three months and 2.600 billion in a year. At the root of the rapid growth in debt are the pandemic which, to get the economy moving again, required huge loans and the surge in inflation which pushed up interest rates and made it more expensive for the government to honor the own debts.
The US economy remains solid
Most observers sweep away any doubts about the solidity and sustainability of the federal debt: it is not a problem for the economy, which always proves to be solid, but it will certainly be a theme, together with spending cuts and tax reforms, on many tables in the coming weeks also in view of the American elections in November.
In August Fitch Ratings downgraded the country's credit rating from "AAA" to "AA+" due to "continuously deteriorating governance standards, including tax and debt." But despite the downgrade, the rating still remains in that very safe A area.
The presence of international investors: Japan in the lead
The issue of US debt is not only internal but also involves the public international investors given that slices of US debt are scattered everywhere in the world. The first figure that catches the eye is that80% in the hands of the public (the remainder is inter-agencies) and almost 8.000 billion, 30%, is in the pockets of international investors. In particular, more than half is in the hands of governments: in the lead is the Japan with 1.100 billion, followed by China with over 800 and then by European allies such as Great Britain, Belgium and Luxembourg.
The next maturities: 1.000 billion in bonds by March
In mid-November, while there was already talk of a debt ceiling, a temporary agreement in Congress on the 2024 budget to avoid the shutdown with which funding to the government was extended, depending on the ministries, only until 19st January and 2 February.
Looking ahead, the debt mountain is destined to rise further: the US Treasury plans to issue securities for 1.000 billion by the end of March next and the debt could exceed 35.000 billion by the November elections. Some observers predict growth of 2.000 billion a year if no measures are taken. According to the Congressional Budget Office's thirty-year estimate, public debt will be equal to a record 181% of GDP by 2053.
What is certain is that US debt has also been burdened by the recent increase in official rates to curb inflation. Their net cost of debt rose by 39% in the last fiscal year and doubled from 2020. It should jump to 1.400 billion within ten years, triple that of 2022. While the underlying issues remain: support for pensions and healthcare, but also of wars.
Tensions between Democrats and Republicans
The growing debt has repeatedly been a source of tension in recent battles over government funding between Democrats and Republicans. On the one hand, Republicans accuse President Joe Biden and Democrats of excessive public spending, pointing the finger at social programs and the energy transition in particular. The White House responds that the current expenses are a consequence of the tax cuts wanted by the American conservative party under George W. Bush and Donald Trump, which to date would have added 10.000 billion to the mountain of debt. Biden claims plans to reduce future deficits by 2.500 billion by eliminating waste and taxes on large companies and high incomes.
Military commitment
Military commitments continue to be an important item for American public finances, approaching 1.000 billion dollars a year and even exceeding it if extraordinary appropriations are added. Since the beginning of the invasion of Ukraine Washington has already allocated over 75 billion in military and civilian aid, a sum that rises to around 113 billion if supplies to allied nations close to the conflict are also calculated. Now the White House has asked for another 61 billion, part of an extraordinary 110 billion package that includes funds for Israel and the migrant emergency at the southern US border. The request is currently stalled in Parliament due to the opposition of Republicans who consider the support for Kiev and global conflicts in general to be excessive.
