The great economy promised by Donald Trump is not adding up. Public debt in the United States has surpassed 40 trillion dollars, reaching another astonishing debt record, according to the Treasury Department.
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This is a threatening milestone for an economy built on precarious fiscal foundations after decades of borrowing to finance the growing costs of the military, social protection programs, and the tax cuts established by Trump. He had promised to restore fiscal order and reduce the U.S. debt burden, but this has been hindered by spending on the Iran war, lower tax revenues, and tariff refunds.
Total U.S. debt reached 40.05 trillion dollars for the first time on Wednesday, just about four and a half years after surpassing 30 trillion. Years of increasing budget deficits, further driven by stimulus funds during the Covid pandemic, have brought public debt close to 100% of GDP.
Surpassing this threshold marks a decade of increased public spending during both Trump and Joe Biden administrations. During his first term, Trump approved 8.4 trillion in debt, while Biden approved 4.3 trillion dollars, noted the Committee for a Responsible Federal Budget.
“To put it in perspective, it took the United States nearly 200 years to reach a gross debt of one trillion dollars for the first time in 1981,” explained Maya MacGuineas, president of that committee, in a statement.
“A 40 trillion debt does not exist only in government accounting books. It is felt throughout the economy and, one way or another, impacts citizens’ wallets. The more we borrow, the more we fuel inflation, displace other budget priorities, and expose ourselves to vulnerabilities in the face of domestic emergencies and foreign turmoil,” she added.
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In the most recent monthly report on U.S. finances, the Treasury recorded a deficit of 432.3 billion dollars in July, the largest monthly deficit since March 2021. The accumulated deficit so far this year approaches 1.8 trillion dollars, a figure higher than that recorded during the same period last year. Ten years ago, the debt level was 19.4 trillion dollars.
The fiscal situation in the United States has had repercussions in the markets, which have recently manifested and likely led the Treasury Department to announce this Wednesday that it will increase the volume of its debt buybacks in the long end of the yield curve.
Treasury bond yields have risen considerably since late June, reaching levels not seen since before the 2008 global financial crisis, which ultimately led the Federal Reserve (Fed) to cut benchmark rates to nearly zero. The Fed also launched an aggressive bond-buying program at the end of that year that helped contain interest rates.
However, concerns about the debt and deficit situation, along with increased corporate bond issuances linked to investments in artificial intelligence, rising term premiums, and doubts about the Fed’s commitment to fighting inflation, have contributed to the rise in yields.
With the Fed reluctant to change interest rates pending more information on inflation and the labor market, government borrowing costs have soared. Debt interest has reached nearly 1.2 trillion dollars this year and constitutes the largest budget expense after Social Security and Medicare (health insurance basically for those over 65 years old).
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