US Government Debt 4,679.2 Trillion
Powell, Dimon, Dalio Warn in Unison
As the U.S. federal government debt skyrockets astronomically, concerns are emerging both inside and outside the government and Wall Street.
The federal debt currently stands at $34.5 trillion (approximately 46,792 trillion KRW), soaring about $11 trillion (approximately 14,919 trillion KRW) compared to March 2020, four years ago, CNBC reported on the 19th (local time).
Until now, concerns about government debt were limited to watchdog organizations such as the Congressional Budget Office (CBO). Even when the opposition raised issues, they were regarded as political attacks. However, recently, not only government officials but also Wall Street heavyweights have been expressing worries about the debt.
Jerome Powell, Chair of the U.S. Federal Reserve (Fed), said on the 14th, "We are experiencing a large structural deficit, and we need to address this issue soon," adding, "Everyone should be aware of the U.S. fiscal deficit, and elected officials should be concerned as it is a problem that must be resolved soon."
Jamie Dimon, CEO of JP Morgan Chase, known as the "Emperor of Wall Street," said in an interview with Sky News UK on the 15th, "The U.S. must clearly recognize the need to focus more on the fiscal deficit issue, which is important globally." Ray Dalio, founder of Bridgewater Associates and called the "Godfather of Hedge Funds," expressed concern that as U.S. debt levels soar, the attractiveness of U.S. Treasury bonds is declining.
According to the CBO, excluding intragovernmental debt, the current public debt totals $27.4 trillion (approximately 37,263 trillion KRW). This is 99% of the U.S. Gross Domestic Product (GDP) and is expected to rise to 116% in 10 years. The CBO described this as "the largest amount ever."
The debt is increasing further due to the rapid surge in the fiscal deficit. The CBO expects a deficit of $1.6 trillion (approximately 2,170 trillion KRW) in the 2024 fiscal year, with $855 billion (approximately 1,160 trillion KRW) already recorded in the first seven months. It is projected to increase to $2.6 trillion (approximately 3,527 trillion KRW) by 2034. The deficit relative to GDP is expected to rise from 5.6% this year to 6.1% in 10 years.
Net interest on the debt has already reached $516 billion (approximately 700 trillion KRW) in this fiscal year. CNBC explained that this amount exceeds government spending on defense or Medicare (U.S. healthcare insurance for the elderly) and is about four times the education expenditure.
Analysts at Wolfe Research pointed out, "The biggest problem is that the U.S. federal debt is now on a completely unsustainable long-term trajectory," adding, "Policymakers and markets are likely underestimating future expected net interest costs." They also expressed concerns that if debt continues to increase, so-called "bond vigilantes" (investors who sell large amounts of bonds to raise yields when bond prices are expected to fall due to inflation or fiscal deficits) may initiate a bond-buying strike, and rising interest costs could constrain government spending.
There is also a forecast that government debt may decrease after the U.S. presidential election this November. However, Goldman Sachs economists Alec Phillips and Tim Krupa said, "This election could change the medium-term fiscal outlook, but the potential impact will be less than expected," adding, "The biggest issues in government finances are Social Security and Medicare, and regardless of who wins, reforms to these programs seem unlikely."
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