Elon Musk has said: US national debt growth is unsustainable

Elon Musk has said: US national debt growth is unsustainable

In a recently released interview, US Federal Reserve Chair Jerome Powell cautioned that the United States is traversing a perilous trajectory, marked by a staggering $34 trillion national debt that soared to unprecedented heights due to pandemic-related expenditures.

Addressing the nation's fiscal challenges, Powell underscored the unsustainable nature of the US federal government's fiscal path, wherein the debt outpaces economic growth. Despite this warning, the past year witnessed budget standoffs and a near debt default, culminating in a credit downgrade by Fitch Ratings, although substantive measures to curtail budget deficits were not undertaken.

According to the Congressional Budget Office (CBO), federal spending is projected to escalate from 24 percent of GDP in 2023 to 29 percent by 2053, while revenues are anticipated to register less growth during the same period. The widening gap between expenditures and revenues, driven by escalating interest costs and expenditures on major healthcare programs and Social Security, portends increasingly substantial budget deficits in the long run.

The intensely polarized political landscape has cast doubts on the nation's fiscal well-being and cast a shadow over its ability to meet financial obligations. Fitch Ratings' downgrade of the US credit rating from "AAA" to "AA+" underscored governance and political challenges, along with the deterioration of the fiscal position.

Lawmakers from both parties have voiced concerns about the sustainability of the national debt but remain divided on the urgency and approach to address the issue. Representative John Rose (R-Tenn.) cautioned against reaching a tipping point where fiscal levels become unsustainable, while Senator John Fetterman (D-Pa.) highlighted competing priorities, including border security and international concerns.

The failure of Congress to pass appropriations bills, resorting instead to short-term spending bills, reflects a degradation in governance, according to analysts. Powell has consistently urged Congress to address the debt burden, emphasizing the need for fiscal restraint, particularly during periods of economic strength.

While responding to the pandemic-induced recession with aggressive stimulus measures has garnered widespread support, the Fed's concurrent series of interest rate hikes has exacerbated the debt burden by increasing interest expenditures. Economists remain divided on when the deficit will reach critical levels, highlighting the uncertain terrain ahead.