At the end of 2020, the US national debt may exceed the size of the American economy

While the United States continues to fight the economic recession as a consequence of the pandemic, the growing public debt is hardly talked about. CNN.

Photo: Shutterstock

Even opponents of the deficit are convincing Washington and the White House to approve yet another round of much-needed economic stimulus.

“The U.S. federal budget has been on an unsustainable path for a long time,” said Federal Reserve Chairman Jerome Powell. “But now is not the time to prioritize these issues.”

However, when the country eventually emerges from the current economic and health crisis, Americans will be left with a severe debt hangover.

On Thursday, October 8, the Congressional Budget Office estimated that in fiscal 2020, which ended September 30, the US had a deficit of $ 3,13 trillion, or 15,2% of GDP. This was due to the chasm between what the country spent ($ 6,55 trillion) and what it earned ($ 3,42 trillion) in a year.

As a share of the economy, the estimated deficit in 2020 is more than three times the annual deficit in 2019. And now it is the highest since the end of the Second World War.

The reason for the huge leap from last year is simple: Since the spring of 2020, the federal government has spent more than $ 4 trillion to help reduce the economic impact of the pandemic on workers and businesses. Most people agree that more money will need to be spent until the White House manages to get the COVID-19 crisis under control.

The U.S. Treasury will not release final figures for fiscal 2020 until the end of October. But if the estimates turn out to be correct, the country's total debt to investors (in fact, it is the sum of the deficit that has accumulated over the years) will exceed the size of the American economy and amount to almost 102% of GDP, according to the calculations of the Committee of the Responsible Federal Budget.

Debt has not been that high since 1946, when it stood at 106,1% of GDP.

“Debt is the size of the economy today, and it will soon be greater than at any time in history,” said Maya McGuiness, president of the Committee for a Responsible Federal Budget.

On the subject: Increasing employment and consumer spending: the US economy is recovering rapidly

The problem with debt levels this high is that they will increasingly limit what the government can do to meet the country's needs.

Expenses are projected to continue to rise and far outstrip income. And interest payments on debt alone (even if rates remain low) will require an ever-growing share of tax revenue.

Given the risks of future crises (such as a pandemic), a debt burden that is already outstripping economic growth will expose the country to an even greater risk of a financial crisis. And he, in turn, will demand a sharp cut in the services and benefits that Americans rely on.

“There is no specific tipping point at which a financial crisis becomes likely or inevitable, nor is there a specific point at which interest costs as a percentage of GDP become unsustainable,” said Congressional Budget Office Director Philip Swagel. “But as the debt increases, the risks increase.”

Read also on ForumDaily:

$ 5 per week: without federal financial assistance, the unemployed may remain poor

The debate of candidates for the vice-presidency of the United States was called the most important in 40 years: what was discussed

Walmart will start selling health insurance: what you need to know about the new service

The court blocked Trump's ban on issuing work visas: why not everyone will be affected

Do you want more important and interesting news about life in the USA and immigration to America? — support us donate! Also subscribe to our page Facebook. Select the “Priority in display” option and read us first. Also, don't forget to subscribe to our РєР ° РЅР ° Р »РІ Telegram  and Instagram- there is a lot of interesting things there. And join thousands of readers ForumDaily New York — there you will find a lot of interesting and positive information about life in the metropolis.