Total US national debt It exceeded 33 trillion dollars for the first time on Monday, serving as a stark reminder of the country’s fragile fiscal trajectory at a time when Washington faces the prospect of a government shutdown this month amid another battle over federal spending.
The Treasury noted this achievement in its daily report detailing the country’s balance sheet. This came at a time when Congress appears to be faltering in its efforts to fund the government before the September elections. 30 deadline. Unless Congress can pass dozens of appropriations bills or agree to a short-term extension of federal funding at current 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 for most federal agencies and revive 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, where Republicans remain divided over their demands and Democrats are unlikely to support any compromise they reach among themselves.
The debate over debt increased this year, and included an extended confrontation over raising the country’s borrowing ceiling.
This battle ended with a bipartisan agreement to suspend the debt limit for two years and reduce federal spending by $1.5 trillion over a decade by freezing some funding that was expected to increase next year and then limiting spending to 1% growth in 2025. The debt is on track to exceed $50 trillion by the end of the decade, even after newly enacted spending cuts are taken into account, as interest on the debt increases and the cost of the country’s social safety net programs continues to grow.
But slowing the growth of the national debt is still a challenge.
Some federal spending programs passed during the Biden administration are expected to be more expensive than previously expected. Previous estimates of the cost of the 2022 inflation control law amounted to about $400 billion over a decade, but according to World Bank estimates Penn Wharton budget model at the University of Pennsylvania It could cost more than $1 trillion thanks to strong demand for the law’s generous clean energy tax breaks.
Pandemic-era relief programs are still costing the federal government money. Claims for the Employee Retention Credit, a tax benefit originally expected to cost about $55 billion, have so far cost the federal government $230 billion, the Internal Revenue Service said last week. The IRS is freezing the program over concerns about fraud and abuse.
Meanwhile, many of President Biden’s attempts to raise more revenue through tax changes have been met with resistance.
In late 2022, the IRS delayed by a year a new tax policy that would require users of digital wallets and e-commerce platforms to begin reporting small transactions to the agency. The policy was expected to raise about $8 billion in additional tax revenue over a decade.
Last month, the IRS delayed for two years a new provision that would prevent high-income earners from transferring extra money into 401(k) retirement accounts. The agency described the delay as “Administrative transition period“.
On the other hand, lobbyists are pushing for loopholes in the new taxes that have been enacted. The 15% alternative minimum corporate tax is designed to ensure that wealthy corporations cannot escape paying single-digit tax rates due to creative use of deductions. However, many of these companies have been lobbying the Treasury Department, which is currently writing the rules that will govern the tax, to create exceptions to preserve their most valuable deductions. This tax differs from the global minimum tax that most countries, with the exception of the United States, are working to adopt.
The retreat from efforts to raise revenues and cut spending has heightened unease among budget watchdog groups who fear an approaching financial crisis.
“As we have seen with the recent growth in inflation and interest rates, the cost of debt can escalate suddenly and quickly,” said Michael Peterson, CEO of the Peter J. Peterson Foundation, which encourages financial restraint. “With more than $10 trillion in interest costs over the next decade, this compounding financial cycle will continue to harm our children and grandchildren.”
Republicans and Democrats in the House and Senate remain divided on the path forward to avoid a government shutdown in the near term, and lawmakers have begun pressing leaders to start focusing on a stopgap bill to keep the government running after September. . . 30.
Republicans are pushing for cuts as a condition for funding the government, blaming out-of-control spending for the country’s financial problems.
“This town is addicted to spending other people’s money,” Rep. Eli Crane, R-Ariz., said on X, formerly known as 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 has been driven in large part by the trillions spent on Republican tax cuts that were skewed in favor of the wealthy and big corporations,” said Michael Kikukawa, a White House spokesman. “Congressional Republicans want to redouble their efforts 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 in taxes and other revenues — reached $1.5 trillion for the first 11 months of the fiscal year, a 61 percent increase over the same period. .a year ago.
In an interview with CNBC on Monday, Treasury Secretary Janet L. Yellen said she is comfortable with the country’s fiscal trajectory because interest costs as a share of the economy have remained under control. However, she noted that it is important to consider future spending.
“The President has proposed a series of measures that will reduce our deficit over time while investing in the economy,” she added. “And this is something we have to do moving forward,” Yellen said.
