Budget deficit problem To the power of the United States. And in the meantime Federal debt is growingalong with interest fees.
On Friday, the US government recorded a The budget deficit is $1.695 trillion In fiscal 2023, up 23% from the previous year due to lower revenues and spending on Social Security, Medicare and record interest costs.
the religionMoreover, it appeared A major concern on Wall Street This year, with lawmakers reaching a last-minute agreement to raise the government’s borrowing limit in May, Treasuries are currently suffering a decline that ranks among the worst in market history.
On September 18, the US government exceeded its commitments 33,000 billion dollars. A month later, the number jumped to $33.64 trillion, meaning an average daily increase of $20 billion.
While the two wars also threaten global financial stability, the risk that inflation will rise again and interest rates will remain high for a long time to come, the United States finds itself facing entirely internal economic challenges.
Disability alert in the United States of America
The Treasury Department said so The deficit was the largest since the $2.78 trillion Covid gap in 2021. This represents a significant return to deficit expansion after successive declines during President Joe Biden’s first two years in office.
This deficit comes at a time when Biden is asking Congress for $100 billion in new foreign aid and security spending, including $60 billion for Ukraine and $14 billion for Israel, along with funding for US border security and the Indo-Pacific region.
The large deficit, which exceeds all pre-Covid deficits, including those caused by Republican tax cuts under Donald Trump and the years of the financial crisis, is likely to inflame Biden’s fiscal battles with House Republicans, whose demands for spending cuts have prompted… The US is on the brink of default in early June.
The outlook is not rosy. The Congressional Budget Office has warned that based on current tax and spending legislation, the US deficit will approach Covid-era levels by the end of the decade, reaching about $2.13 trillion in 2030 as interest, health care and pension costs rise.
Analysts note that individual income tax revenues declined because stock market weakness in 2022 depressed capital gains and because the Internal Revenue Service extended tax deadlines for much of California and parts of Alabama and Georgia due to natural disasters.
Moreover, increased spending on social welfare programs, including Social Security and Medicare, as well as Medicaid, was responsible for just over a quarter of the growing budget deficit.
Debt boom, will interest cost more than defense?
The outlook is not good US debt burden. If the debts of the world’s largest economy rise at the rate the Congressional Budget Office expects, Government spending on net interest could rise From less than $500 billion to a staggering amount $1.4 trillion by 2033
The warning is widespread. “We are witnessing in real time a painful combination of rising debt, inflation and interest costs, which leads to more debt.”said Michael Peterson, CEO of the Peter J. Peterson Foundation, a nonpartisan organization that seeks to raise awareness of the issue. Interest costs have risen by about 40% since last year.
Generally, “A country’s debt levels become a problem If you have interest rates higher than the economic growth rate“The additional revenue the economy generates each year becomes less than the interest payments on the debt, and the debt begins to grow on its own.”Darryl Spence, economist for US Asset Manager, said in a research note.
The United States was far from this situation. But now, everything is changing.
Spence warned that Rapid growth of debt It could force the government to raise taxes, ignite more bond fires and force the government to raise taxes Federal Reserve to prevent interest rates from rising.
“One might also expect economic growth to slow, given that Public spending should be redirected to debt servicing“, he added. For investors, this may lead to lower stock market returns over time, given the strong long-term correlation between GDP growth and market returns.
For all these reasons, the United States is also navigating turbulent economic waters.
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