U.S. national debt hits record $35 trillion

America’s ballooning debt crisis set another grim milestone this week—with the federal debt surpassing the $35 trillion mark for the first time, according to new data from the Treasury Department.

The biggest deficit drivers include Medicare and Medicaid, with nearly $1.8 trillion in annual spending. Social Security is next at $1.45 trillion, followed by the defense budget at $911 billion.

The fourth largest expense is interest on the debt itself, which now stands at a whopping $905 billion annually. That’s on par with annual defense spending.

Perhaps the most concerning part is that government borrowing has accelerated since the pandemic. Over the past year alone, Uncle Sam racked up a whopping $2.35 trillion in federal debt.

For further illustration of just how out-of-control deficit spending has become, consider that the national debt stood at roughly $907 billion four decades ago.

Federal debt-to-GDP has also exploded, rising from 34.6% in 1980 to 122.5% today. Excluding debt held in intergovernmental accounts like Social Security, the debt-to-GDP ratio is forecast to hit 99% this year.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, called this feat a “truly depressing achievement,” and one could make it harder for the government to manage its finances moving forward.

“Yet despite all the risks and warning signs, these alarm bells seem to be falling on deaf ears,” she said. “Pay for your new spending; pay for your new or extended tax cuts; make deals, shake hands, pass budgets. In a word: govern.”

Calls for fiscal restraint are growing louder, with the highest levels of government urging policymakers to cap their “unsustainable” spending.

The $35 trillion deficit isn’t even the worst part

Federal Reserve Chairman Jerome Powell thinks the absolute size of the budget deficit isn’t even the worst part. Rather, it’s the pace of borrowing that’s keeping him up at night.

“The level of debt we have is not unsustainable, but the path that we’re on is unsustainable,” Powell said in a panel discussion hosted by the European Central Bank.

“In the long run, we’ll have to do something sooner or later, and sooner will be better than later,” Powell said.

Unfortunately, policymakers are unlikely to exercise fiscal restraint anytime soon because 2024 is an election year that will be filled with new promises and lofty spending programs.

Because of that, Moody’s expects that America’s fiscal deficits “will remain very large, significantly weakening debt affordability.”

Recent forecasts by the International Monetary Fund (IMF) suggest the U.S. government debt will nearly double by 2053. Unlike other advanced nations, Washington hasn’t taken decisive steps to curb its deficit spending.

The IMF said how America manages its fiscal policies could make it harder to control inflation. This could have “profound effects on the global economy,” the Washington-based lending institution said.