NEW YORK (CNN Business) - America’s national debt just hit
another sobering milestone.
Total public debt outstanding is now above $30 trillion, according to Treasury Department data published.
Government borrowing accelerated during the COVID-19 pandemic as Washington spent aggressively to cushion the economic blow from the crisis. The national debt has surged by about $7 trillion since the end of 2019.
It’s impossible to know how much debt is too much, and economists remain divided over how big of a problem this really is. But the latest debt milestone comes at a delicate time as borrowing costs are expected to rise.
After many years of rock-bottom interest rates, the Federal Reserve is shifting into inflation-fighting mode. The Fed is planning to launch its first series of rate hikes since 2015. Higher borrowing costs will only make it harder to finance that mountain of debt.
“It doesn’t mean a short-term crisis, but it does mean we are going to be poorer in the long term,” said David Kelly, chief global strategist at JPMorgan Asset Management.
Interest costs alone are projected to surpass $5 trillion over the next 10 years and will amount to nearly half of all federal revenue by 2051, according to the Peter G. Peterson Foundation, an organization focused on raising awareness to the fiscal challenge.
Kelly pointed out that rising borrowing costs will limit how much money Washington can spend on other priorities like climate change.
The federal government now owes almost $8 trillion to foreign and international investors, led by Japan and China. Eventually, that will need to be paid back, with interest.
“That means American taxpayers will be paying for the retirement of the people in China and Japan, who are our creditors,” said Kelly.
The $30 trillion national debt figure is somewhat inflated by the fact that a chunk of the money is owed by the government to itself. This is debt held in Social Security and other government trust funds. So-called intragovernmental holdings total more than $6 trillion.
Still, the national debt has skyrocketed in recent decades, driven up in part by the 2008 financial crisis and then the pandemic.
Total debt outstanding stood at $9.2 trillion in December 2007 just as the Great Recession was beginning, according to Treasury data.
By the time former president Donald Trump took office, the national debt stood at nearly $20 trillion.
“COVID exacerbated the problem. We had an emergency situation that required trillions in spending,” said Michael Peterson, CEO of the Peterson Foundation. “But the structural problems we face fiscally existed long before the pandemic.
About two-thirds (67%) of Americans in a CNN poll in December said government spending is a major problem for the nation’s economy, below rising costs for food and everyday data-x-items (80% said that was a major problem) and roughly on par with the pandemic (65% said COVID is a major problem).
There is a wide partisan gap on this issue, with 90% of Republicans calling government spending a major problem, compared with 70% of independents and 44% of Democrats.