WASHINGTON (Dispatches) – U.S. federal debt surpassed $28 trillion in March, with every man, woman and child in the country owing more than $85,000 for the federal government’s spending. Combined debt – which includes federal debt plus all other public and private obligations, stands at over $85 trillion – or over four times the U.S.’ annual GDP.
The federal government might run out of money and go into default in August unless Congress raises the debt ceiling, Biden Treasury Secretary Janet Yellen has warned.
Speaking before a Senate appropriations subcommittee hearing this week and discussing the Treasury’s budget, Yellen stressed that “defaulting on the national debt should be regarded as unthinkable,” and said that “failing to increase the debt limit would have absolutely catastrophic economic consequences.”
In her words, these consequences would include the precipitation of a financial crisis, and threaten jobs and savings at a time when the U.S. is still recovering from the economic fallout caused by the coronavirus.
The economist indicated that the current suspension of the debt ceiling, agreed to by Congress in 2019, is set to run out on 31 July, and that unless it is raised and/or suspended again, the federal government will not be able to borrow money to cover expenses, including interest payments on debt.
“It’s possible we could reach that point while Congress is out in August, and I would really urge prompt action on raising the limit or suspending it,” Yellen said, referring to Congress’s traditional summer recess, which runs the entire month of August and half of September.
The coronavirus crisis prompted the government to pump over $6 trillion in additional money into the economy, causing mild inflation and adding to the federal debt.
However, unlike most countries, which suffer major inflationary penalties and other macroeconomic problems if they print too much money or accumulate too much debt, the United States’ unique position in the world as the issuer of the dollar, which enjoys the status of the de facto world currency, has enabled Washington to rack up debt and print money without fear of major repercussions for decades now.
In recent months, GOP lawmakers have been aggressively searching for ways to slash away at what they perceive to be the Democrats’ liberal spendthrift agenda, forcing the president’s party to cut back on his signature multitrillion-dollar infrastructure bill, and causing other sweeping initiatives on issues including gun control, police reform and elections to get bogged down.