US National debt hits $34 trillion

The gross national debt of the federal government has now surpassed $34 trillion, reaching a record high and signaling future challenges for America's fiscal health. The U.S. Treasury Department released a report on Tuesday, highlighting the nation's financial situation amid political divisions in Washington, raising concerns about a potential government shutdown without an annual budget.

The national debt exceeded $34 trillion earlier than pre-pandemic projections, with the pandemic playing a significant role in accelerating borrowing. Under both the Trump and Biden administrations, the government borrowed extensively to stabilize the economy during the pandemic-induced economic downturn. However, the subsequent rebound led to inflation, causing interest rates to rise and increasing the government's debt servicing costs.

While the national debt's current impact on the economy appears manageable, concerns arise about its long-term consequences. The debt held by the public, excluding intra-governmental holdings, is around $26.9 trillion, approximately equal to the U.S. gross domestic product. Policymakers worry that the increasing debt could jeopardize national security, social programs like Social Security and Medicare, and lead to government dysfunction in the future.

Foreign buyers of U.S. debt have reduced their holdings, raising additional concerns about the nation's ability to meet its financial obligations. The Peterson Foundation warns that the trajectory of increasing debt should serve as a warning to policymakers, emphasizing the need for responsible fiscal management to secure the country's future.