The national debt eclipsed $33 trillion on Sept. 15, while the budget deficit is on track to reach $2 trillion in the current fiscal year. Experts say that the public is becoming numb to these figures because they've become the new normal in Washington.
But while soaring debt and deficits are the status quo in the nation's capital, economists are combing through the books to assess the U.S. government's fiscal condition.
Federal spending is poised to top $6.5 trillion in the current fiscal year. While that's less than the COVID-19 pandemic high of close to $8.9 trillion, it's 33 percent higher than the pre-crisis level of $4.875 trillion.
President Joe Biden has repeatedly claimed that he slashed the budget deficit by $1.7 trillion. But that's considered a misleading assertion by many observers since most of the decline in federal outlays resulted from the expiration of COVID-related stimulus and relief spending, rather than employing any fierce budget cuts by the White House or Congress.
This mismatch has produced a rolling 12-month deficit of about $2 trillion. If it weren't for the Supreme Court's decision to block President Biden's student loan forgiveness program, the budget gap could have widened by another $330 billion in August.
It doesn't appear that deficits will be reduced any time soon. The CBO forecasts that deficits will “fluctuate between $1.6 trillion and $1.8 trillion and then grow to $2.9 trillion in 2033.”
With the new fiscal year approaching, Congress has failed to approve appropriations legislation or stopgap spending laws to prevent a government shutdown. Current funding for most federal programs, except for Social Security payments and the military, expires on Sept. 30. If lawmakers don't approve a new budget, many components of the government will temporarily close, but the nearly 20 House Republicans making fiscal-related demands believe that's a fight worth having.
Interest Payments SoarInterest payments are on track to exceed $1 trillion before the current fiscal year is over. It's estimated that daily interest spending has increased to about $2 billion over the past 12 months.
One of the main reasons why annual budget holes have gained more attention is the significant jump in interest payments in a climate of rising interest rates amid the Federal Reserve's fight to rein in inflation.
Since March 2021, the policy rate has climbed by 500 basis points to a target range of between 5.25 and 5.5 percent. Treasury yields have soared, with the benchmark 10-year yield hitting its highest level since 2007.
However, Treasury Secretary Janet Yellen isn't too concerned about the nation's intensifying debt burdens, alluding to one statistic that measures net interest payments relative to the GDP.
The CBO warned this past summer that the metric could increase to nearly 7 percent of GDP by 2053.
Feeling Numb"We are becoming numb to these huge numbers, but it doesn’t make them any less dangerous," Maya MacGuineas, president of the Committee for a Responsible Federal Budget (CFRB), said in a statement, noting that policymakers need to be honest with the American people and present a plan to "bring our debt under control."
Are financial markets beginning to get worried?