The U.S. gross national debt exceeded $30 trillion for the first time on Tuesday, a monumentally negative financial event that will reverberate across many sectors of the economy, experts say.
The $30 trillion benchmark represents a drastic increase in the nation’s debt of 33% in just two years. Prior to the pandemic, analysts at the Congressional Budget Office (CBO), projected the U.S. national debt would hit $32 trillion in 2030, MarketWatch reports. The arrival of the pandemic, as well as record government COVID relief in the form of the CARES Act in 2020 and the American Rescue Plan in 2021, have caused the United States to top $30 trillion in debt a decade earlier than expected.
Michael Peterson, CEO of the Peter Peterson G. Foundation, a nonpartisan group that advocates reducing the deficit, tells The New York Times: “Hitting the $30 trillion mark is clearly an important milestone in our dangerous fiscal trajectory. For many years before COVID, America had an unsustainable structural fiscal path because the programs we’ve designed are not sufficiently funded by the revenue we take in.”
Concerns about the debt have hampered the aggressive infrastructure spending agenda of President Joe Biden, as influential Senator Joe Manchin (D, W. Va) has cited the “staggering debt” as a reason to be cautious on proceeding with President Biden’s reconciliation package, the Build Back Better Act.
BBB Price Tag: $367B
The Congressional Budget Office projects the plan will add over $367 billion to the deficit, a figure that White House Press Secretary Jen Psaki has disputed. To the contrary, Psaki has maintained that economists say Build Back Better will save the government money.
Julio P. Gonzalez, CEO of Engineered Tax Services, a specialty tax engineering firm, tells Newsmax Finance he is alarmed by the $30 trillion milestone. Gonzalez says mainstream Democrats are not concerned about their spending plans impacting the debt because “they are using spending as a reason to justify higher taxes. The debt increase, to them, justifies massive tax increases.”
The cause and effect from the uptick in government spending can already be felt across the economy, resulting in another unfortunate record we’ve seen: the highest inflation increase in 40 years, Gonzalez says.
“The cumulative spending has harmed our national debt the most,” he maintains. “But the biggest harm was the money given out in unemployment benefits and child credits that took away from the labor supply, and, thus, generated massive inflation.”
Higher Taxes Coming
Finally, Gonzalez believes that despite Democrats’ more far-reaching tax plans, including a plan to increase taxes on billionaires, being blocked by moderate Senators, Congress will “find a way to increase taxes.”
Senator Rick Scott (R, FL) agrees, saying in a statement: “In the face of this looming threat, Democrats have chosen not to reverse course, but throw even more gasoline on the fire and rush to spend trillions more without any accountability to the taxpayer. It is our responsibility to put structural reforms in place, to get our country back on the path to economic prosperity and leave the Biden and the Democrats’ reckless tax-and-spend agenda behind.”
Greg McBride, Chief Financial Analyst at Bankrate.com, is more sanguine about the $30 trillion national debt benchmark. The annual increase in the national debt, no matter how large or how small, “has become an American tradition,” McBride tells Newsmax Finance.
In 2020 and 2021, however, the debt increase “necessitated far more federal spending beyond our usual profligate ways,” he says.
Additionally, McBride says “as interest rates rise, the additional cost of servicing this debt will crowd out spending on other programs, like education, and the risk will grow the larger the debt becomes.”
Lastly, McBride disagrees with Mr. Gonzalez on tax hikes, saying, “It is not a foregone conclusion that taxes will be raised to combat the increasing debt. The debt has been growing for over 50 years, but so has the economy.”
© 2023 Newsmax Finance. All rights reserved.