Us Appeals Court Temporarily Blocks Bidens Student Loan Debt Giveaway
Wake up, America. That ticking sound youre hearing is the American debt time bomb that with each passing day is getting precariously close to detonating and crashing the US economy.
Businesses, consumers and especially the federal and state governments have become hooked on red ink as if it were crack cocaine. Two factors have fueled this borrowing binge: an era of low interest rates and falling real wages thanks to the 15% rise in prices of Bidenflation.
Lets review the borrowing up-escalator that accelerated during COVID but hasnt subsided.
The King Kong of borrowing is Uncle Sam. The national debt is $31 trillion when including Social Securitys and Medicares unfunded liabilities. Thats getting close to 150% of our national gross domestic product of $22 trillion. Some $5 trillion has been added in just the past three years. Balancing the budget seems like a pipe dream these days.
Next add state and local government debt and unfunded liabilities. The American Legislative Exchange Council estimates that at just under $6 trillion.
Now what about American households? The latest estimate for consumer debt is $16.5 trillion, per the New York Federal Reserve. Most of that debt is mortgages, but increasingly Americans are taking on debt for routine expenses to pay monthly bills like groceries and gas at the pump. Thanks, President Biden.
So add it all up, and American society now owes $66,000,000,000,000 of debt! Thats roughly three times our annual GDP.
National Debt Vs Budget Deficit
Its important to understand the difference between the federal governments annual budget deficit and the national debt. The federal government generates an annual deficit when its spending over the course of a year exceeds government revenue from sources including taxes on personal income, corporate income, and payroll earnings.
When annual congressional appropriations exceed federal revenue, the U.S. Treasury finances the deficit by issuing Treasury bills, notes, and bonds. These Treasury products may be purchased by investors including individuals and pension funds banks, insurers, and other financial institutions and the Federal Reserve as well as foreign central banks.
A countrys national debt is the sum of such annual budget deficits and any offsetting surpluses. It is the total amount of money that a country owes .
What Will Happen To Our National Debt
U.S. spending is currently at an all-time high to combat the effects of COVID-19. The current level of debt-to-GDP is comparable to the period immediately after World War II. Despite the effort to reduce the national debt, it is apparent and crucial for the government to take on the debt during times of crisis. Being able to adequately and successfully respond to emergencies is one of the many reasons why the national debt should be reduced governments should respond to events in an appropriate and timely manner with its citizens in thought.
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Tracking The Federal Deficit: September 2021
The federal deficit for September 2021 was $59 billion, approximately $65 billion less than the deficit for September 2020. This deficit was the difference between revenues of $460 billion and spending of $519 billion. Although individual and corporate tax payments in September typically produce a large surplus, COVID-19 relief spending eclipsed them and led to a September deficit for the second year in a row.
Revenues increased by $87 billion in relation to the same month last year. The increase was mostly caused by a 23% rise in income and payroll taxes and a 71% increase in corporate income tax receipts.
Spending rose $22 billion year-over-year. Notably, spending by the Department of Education was 107% higher than in September 2020. An upward revision of $95 billion to the departments estimated net subsidy costs of loans and loan guarantees was driven partially by pandemic-related causesincluding the extension of pauses on the payment of loan principal and interest and the collection of loans in defaultand partially by re-estimates of how much the federal government would be repaid on its outstanding portfolio. Spending on refundable tax credits increased $21 billion year-over-year primarily due to the monthly advanced Child Tax Credit payments authorized by the American Rescue Plan earlier this year.
Us National Debt Tops $31 Trillion For First Time
Americas borrowing binge has long been viewed as sustainable because of historically low interest rates. But as rates rise, the nations fiscal woes are getting worse.
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WASHINGTON Americas gross national debt exceeded $31 trillion for the first time on Tuesday, a grim financial milestone that arrived just as the nations long-term fiscal picture has darkened amid rising interest rates.
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. While record levels of government borrowing to fight the pandemic and finance tax cuts were once seen by some policymakers as affordable, those higher rates are making Americas debts more costly over time.
So many of the concerns weve had about our growing debt path are starting to show themselves as we both grow our debt and grow our rates of interest, said Michael A. Peterson, the chief executive officer of the Peter G. Peterson Foundation, which promotes deficit reduction. Too many people were complacent about our debt path in part because rates were so low.
Which President Created The Most Debt
In terms of percentages, President Franklin Delanor Roosevelt added the most debt with a 1,048% increase in national debt from his predecessor President Herbert Hoover. With $236 billion added to the national debt, President Roosevelt served as president during the time of the Great Depression which largely depleted the countrys revenue. To combat this, he set up the New Deal which included relief programs and government spending to address unemployment, severe droughts and agriculture disruptions, and bank failures. The largest part of the addition to the national debt was World War II – the war cost the country $209 billion from 1942 to 1945.
Revolutionary War Kicks Off Us Debt
Wars were always a major debt factor for our nation. Congress could not finance the Revolutionary war with large tax raises, as the memory of unjust taxation from the British stood fresh in the minds of the American public. Instead, the Continental Congress borrowed money from other nations.
The founders led negotiations with Benjamin Franklin securing loans of over $2 million from the French Government and President John Adams securing a loan from Dutch bankers. We also borrowed from domestic creditors. While the war was still going on, in 1781, Congress established the U.S. Department of Finance.
Two years later, as the war ended in 1783, the Department of Finance reported U.S. debt to the American Public for the first time. Congress took initiative to raise taxes then, as the total debt reached $43 million.
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Major Events And The Impact On Us Debt
It helps to consider the national debt in context. During times of war, the U.S. increases military spending. When the economy is down, the federal government uses spending and tax cuts to spur growth. When these expansionary fiscal policies boost economic growth, higher tax revenues can be used to pay back the debt.
Heres a timeline of the national debt by year, and how it compares to national events.
Tracking The Federal Deficit: February 2022
The Congressional Budget Office estimates that the federal government ran a deficit of $216 billion in February 2022, the fifth month of fiscal year 2022. Februarys deficit followed a surplus in January and was the difference between $290 billion in revenues and $506 billion in spending. This deficit level is $95 billion less than the deficit recorded in February 2021.
Analysis of notable trends: In the first five months of FY2022, the federal government ran a deficit of $475 billion, 55% less than at this point in FY2021 . The cumulative deficit for FY2022 thus far is $149 billion lower than even the deficit over the comparable period in FY2020, pre-dating the onset of the COVID-19 pandemic.
Receipts continue to grow robustly at $1.8 trillion for FY2022 to date, $371 billion more than the government collected during the first five months of the prior fiscal year. Individual income and payroll tax receipts increased by 25% , reflecting rising wages and salaries primarily among higher-income workers subject to higher tax rates, as well as the influx of some payroll taxes that companies were allowed to defer under pandemic relief legislation. Corporate income tax revenues increased by 31% over the past five months compared to the same period last fiscal year.
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The National Debt Affects Everyone
If that forecast were to come to pass, the incremental increase over current debt service costs would be roughly equivalent to the Social Security’s current funding needs at about 5% of U.S. GDP.
This would almost certainly force policymakers to make painful choices, with consequences that would be felt worldwide. It’s also possible this scenario won’t come to pass because of steps taken in order to avoid it, actions likely to have significant effects in their own right. Or the distant future could look more like the recent past, with investors willing to accept minimal Treasury yields based on the available alternatives.
Just as U.S. currency in circulation is a Federal Reserve liability akin to debt, Treasury obligations may be thought of as an interest-bearing currency. And if cash and Treasury debt are equivalent, then the issuance of U.S. government debt is only material to the extent it incurs future debt service costs.
National Debt By President
The National Debt has always been an area of interest for the United States President George Washington appointed future President Alexander Hamilton to understand and solve the $80 million debtthat had accrued due to the Revolutionary War. Hamilton came up with the plan to pay off the debt through taxes and the creation of the national bank. Since then the United States has steadily increased its budget deficit, and the national debt has continued to rise.The first time that the national debt hit the $1 billion mark was in 1863 while the Civil War was occurring it hit the $2 billion was two years later when the civil war ended in 1865. As the country went to battle during World War I and World War II, the national debt hit the $10 billion mark and $100 billion marks respectively. By 1982 after the Vietnam War and the Cold War, the national debt hit the $1 trillion mark for the first time in history. By the 21st Century, the national debt got to $20 trillion after major events such as the War on Terror and the Great Recession. Today , the national debt stands at $30.2 trillion and public debt is roughly 100% of the country’s GDP.
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Tracking The Federal Deficit: February 2021
The Congressional Budget Office estimates that the federal government ran a deficit of $312 billion in February 2021, the fifth month of fiscal year 2021. This months deficitthe difference between $246 billion in revenue and $558 billion in spendingwas $77 billion more than last Februarys. The deficit so far in fiscal year 2021 has climbed to just over $1 trillion, an 83% year-over-year increase . Year-over-year, total spending has risen by 25% and revenues have increased by 5%.
Analysis of Notable Trends: Increased spending in February, and fiscal year 2021 as a whole, mostly resulted from pandemic relief legislation. For instance, the Small Business Administrations Paycheck Protection Program accounted for most of the $133 billion spending increase from last February to this one. SBA outlays soared to $91 billion this February compared to only $100 million in the same month last year. The other largest spending changes were greater outlays on unemployment compensation and $17 billion less in refundable tax credit payments because of a delayed start to the tax filing season this year.
Despite a historic recession, revenues were 5% higher in the first five months of fiscal year 2021 than during the same period last year . This healthy growth is surprising, especially when compared to the onset of the last major recession: In the first five months of fiscal year 2009, revenues plunged 11% year-over-year.
Why Does Interest Rise
Higher interest rates and growing debt are two of the main causes of the interest on the debt. But what causes them to rise?
Interest rates increase when the economy is doing well. Investors have the confidence to buy riskier assets, such as stocks. There’s less demand for bonds, so the interest rates must rise to attract buyers.
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What Is The Debt Ceiling
The debt ceiling is the legal limit set by Congress on how much the Treasury Department can borrow, including to pay debts the United States already owes. Since it was established during World War I, the debt ceiling has been raised dozens of times. In recent years, this once routine act has become a game of political brinkmanship that has brought the United States near default on several occasions, CFRs Roger W. Ferguson Jr. writes. Ferguson and other experts argue that the debt ceiling should be scrapped entirely. The only other advanced economy to have one is Denmark, and it has never come close to reaching its ceiling.
Understand Inflation And How It Affects You
- Social Security: The cost-of-living adjustment, which helps the benefit keep pace with inflation, will be 8.7 percent next year. Here is what that means.
- Budget Surpluses: Up to 20 states are using their excess funds to help taxpayers deal with rising costs. But some economists worry that the payments could fuel inflation.
- Tax Rates: The I.R.S. has made inflation adjustments for 2023, which could push many people into a lower tax bracket and reduce tax bills.
- Your Paycheck: Inflation is taking a bigger and bigger bite out of your wallet. Now, its going to affect the size of your paycheck next year.
In recent weeks, administration officials have walked a thin line on deficits. They have championed deficit-cutting moves like the climate, health care and tax bill that Mr. Biden signed into law in August as necessary complements to the Feds efforts to bring down inflation by raising interest rates. They have said Mr. Biden would be happy to sign further deficit cuts into law, in the form of tax increases on high earners and large corporations.
Our budgets have been heavily fiscally responsible, and they build a very compelling architecture toward critical investments and fiscal responsibility, Jared Bernstein, a member of the White House Council of Economic Advisers, said in an interview. So it would be a mistake to overtorque in reaction to current events.
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Breakup Of Northern Securities
In 1902, President Theodore Roosevelt ordered the Justice Department to break up the Northern Securities Company. This holding company controlled the main railroad lines from Chicago to the Pacific Northwest.
Roosevelt took the position that the company was an illegal monopoly. The company appealed the move, and the case went all the way to the Supreme Court, which ruled in favor of the federal government.
National debt: $2.3 billion
Us National Debt Tops $30 Trillion For First Time In History
The Treasury Department this week reported that the total national debt of the United States surpassed $30 trillion for the first time in history, an amount equal to nearly 130% of Americaâs yearly economic output, known as gross domestic product. The eye-popping figure makes the U.S. one of the most heavily indebted nations in the world. The federal debt has been high and rising for decades, but the federal governmentâs response to the coronavirus pandemic, which involved massive infusions of cash into the U.S. economy, greatly accelerated its growth. At the end of 2019, prior to the pandemic, the national debt stood at $22.7 trillion. One year later, it had risen by an additional $5 trillion, to $27.7 trillion. Since then, the nation has added more than $2 trillion in further debt. A grim reminder
While the $30 trillion figure, by itself, has no significant meaning, it may serve to focus attention on what some see as a major concern for the future health of the country. âHitting the $30 trillion mark is a reminder of just how high our debt is and just how much weâve been borrowing,â said Marc Goldwein, senior vice president and senior policy director for the Committee for a Responsible Federal Budget.
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The National Debt Dilemma
- The pandemic has taken the U.S. national debt to levels not seen since the 1940s.
- The United States is in a unique position because it holds the worlds reserve currency, allowing it to carry debt more cheaply than other countries.
- Some experts argue that the United States can safely continue to sustain high levels of debt, while others warn that it will eventually have to face the consequences.
The U.S. national debt is once again raising alarm bells. The massive spending in response to the COVID-19 pandemic has taken the budget deficit to levels not seen since World War II. This expansion follows years of ballooning debttotaling nearly $17 trillion in 2019that will now be even more difficult to reduce. Raising the debt ceiling, the legal limit on government borrowing, has become a perennial fight in Congress.