The U.S. national debt has eclipsed $34 trillion for the first time, the Treasury Department said Tuesday, as persistently large annual deficits continue to add to the federal tab.
Roughly three months after the debt first hit $33 trillion, the new milestone comes as lawmakers brace for fiscal showdowns over spending levels in the new year. Government borrowing costs have increased due to the Federal Reserve’s campaign to raise interest rates, spending has remained above pre-covid levels, and tax receipts dropped last year—all worsening the nation’s fiscal outlook.
The $34 trillion in total debt recorded at the end of last week represents a more than $2 trillion increase from the roughly $31.4 trillion in debt held at the start of last year. However, economists are sharply divided over the danger posed by the federal debt. Some experts argue the tide of red ink poses a threat to the nation’s overall fiscal health, while others maintain the federal government has plenty of capacity to borrow without risking an economic crisis. The economy has been growing at a rapid clip in recent quarters, which makes the increase in debt less significant because the borrowed money represents a smaller share of the nation’s economic output.
Congress is due back from its holiday break next week—just in time to deal with federal spending laws set to expire Jan. 19 and Feb. 2, which could force at least partial government shutdowns if lawmakers don’t pass extensions.
President Biden has blamed GOP tax cuts for adding trillions to the deficit, while congressional Republicans blame spending measures passed under Biden and other Democrats.
“Hitting $34 trillion is another reminder of how unsustainable our fiscal situation is. We’re adding $2 trillion to our debt every year at a time unemployment is near record lows,” said Marc Goldwein, senior vice president at the Committee for a Responsible Federal Budget, a Washington-based think tank. “If we’re adding this much to the debt in good times, things may get really awful in bad times, and we can’t grow our debt faster than our economy forever.”
The increase in the federal debt could shape upcoming debates over the 2017 GOP tax cut, because many provisions from that legislation are set to expire in 2025. Bobby Kogan, an analyst at the Center for American Progress, a center-left think tank, has found that the tax cuts under Presidents George W. Bush and Donald Trump and their subsequent bipartisan extensions have added $10 trillion to the national debt so far.
“It’s important to hold the debt number in context: The economy is growing, it is strong, and we have to think about it relative to our resources,” said Claudia Sahm, who served as a researcher at the Federal Reserve. “This is not a sign of an imminent crisis—maybe something we need to deal with, but we are not in a crisis moment on debt.”