The New York Times published an article Tuesday warning that the rising national debt, which just surpassed a historic $31 trillion, poses “a political problem” for President Biden and an economic problem for the United States as a whole.
The article, titled “U.S. National Debt Tops $31 Trillion for First Time”, briefly was featured as the New York Times’ front page story and was written by economic policy reporter Alan Rappeport and White House correspondent Jim Tankersley.
In the piece, Rappeport and Tankersley warned that rising interest rates will make it more expensive for the federal government to borrow money, a departure from the comparatively cheap money it has been able to obtain in recent years due to low interest rates and inflation.
“America’s gross national debt exceeded $31 trillion for the first time on Tuesday, a grim financial milestone that arrived just as the nation’s long-term fiscal picture has darkened amid rising interest rates,” The Times reported.
“The breach of the threshold, which was revealed in a Treasury Department report, comes at an inopportune moment, as historically low interest rates are being replaced with higher borrowing costs as the Federal Reserve tries to combat rapid inflation,” the article continued.
Last month, the Federal Reserve raised interest points by 75 basis points, and it is expected to do so again twice more this year. Higher interest rates make borrowing more expensive, including for the government, which sells various debt products to the public to finance its expenditures.
“Higher rates could add an additional $1 trillion to what the federal government spends on interest payments this decade, according to Peterson Foundation estimates,” the reporters wrote, noting “its borrowing costs rise and fall along with interest rates.”
They pointed to a report by the Congressional Budget Office published earlier this year which warned that mounting debt can cause investors to lose confidence in the U.S. government’s ability to pay back what it owes: “Those worries, the budget office said, could cause ‘interest rates to increase abruptly and inflation to spiral upward.’”
As for the political implications of the rising debt, The Times reporters wrote, “The $31 trillion threshold also poses a political problem for President Biden, who has pledged to put the United States on a more sustainable fiscal path and reduce federal budget deficits by $1 trillion over a decade.”
They noted The Committee for a Responsible Federal Budget estimates Biden’s spending has added $5 trillion to the deficit.
“That projection includes Mr. Biden’s signature $1.9 trillion economic stimulus bill, a variety of new congressionally approved spending initiatives and a student-loan debt forgiveness plan that is expected to cost taxpayers nearly $400 billion over 30 years,” The Times reported.
Inflation has been stubbornly persistent, with the most recent consumer price index data revealing the inflation rate to stand at 8.3%. Federal Reserve Chairman Jerome Powell has signaled that the central bank will continue to raise rates in order to combat inflation.