'Truly depressing'— U.S. national debt soars at the fastest pace since Covid

The U.S. federal government is showing no signs of fiscal restraint, with Uncle Sam racking up debt at the fastest pace since the Covid stimulus.

In just over three months, the national debt jumped by a whopping $1 trillion, according to the Treasury Department. That’s by far the largest three-month increase since 2020.

The federal debt now stands at just over $34 trillion, a new all-time high and a "truly depressing achievement," according to Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a Washington-based watchdog group.

This new record came just seven months after President Biden passed a new debt ceiling limit, narrowly avoiding Washington’s first-ever default.

Since the debt-ceiling standoff, the federal debt has added an extra $2.5 trillion.

With a supposedly thriving economy, the ever-growing national debt leaves Americans wondering where all the money is going. They probably won’t like the answers.

More debt to pay off debt?

Much like a personal budget, the federal government has to borrow when it spends more than it earns.

This has been the case since 2001—America's last surplus budget year. Since then, Uncle Sam has been spending above its means due to growing costs, including Social Security, and tax cuts.

Fast forward to 2023: the federal government collected $4.44 trillion in taxes. Over the same period, it spent $6.3 trillion—leaving a massive hole in the budget that needs to be filled with borrowed money.

Unfortunately, not all that spending is going toward productive things that benefit Americans. As Creditnews Research recently reported, the lion's share of federal spending funded by debt goes to paying off that very debt.

In fact, annual interest payments on U.S. federal debt hit a record $1.1 trillion last year. That’s 34% higher than national defense spending and about a quarter of all tax receipts.

Another significant spending item is Bidenomics, the president’s historic bill meant to fix American infrastructure, greenify the economy, and boost domestic manufacturing.

Experts, however, don't agree on whether it's productive to spend so much for a country sitting on tens of trillions of dollars in increasingly expensive debt.

The elephant in the room

Many economists theorize that deficit spending should be reserved for periods of weak economic growth.

The idea is that going into debt helps spur the economy, leading to higher growth, more tax receipts, and, ultimately, the re-balancing of the budget.

That's not the case today, with consumer spending and employment punching above their weight. Yet, the government is spending like there's no tomorrow.

According to Harvard economics professor and former Obama adviser Jason Furman, America’s current deficit spending overshadows all but “major crises”—such as WWII, the 2008 financial crisis, and Covid.

Forman thinks that’s a huge source of concern. "To see this in an economy with low unemployment is truly stunning. There’s never been anything like it,” Furman said.

“A good and strong economy, with no new emergency spending—and yet a deficit like this. The fact that it is so big in one year makes you think it must be some weird freakish thing going on,” he said.