Why is the United States addicted to borrowing?, Breaking through 33 trillion US dollars

US treasury bond bonds have broken records again. According to the latest data from the US Treasury Department, the total amount of US treasury bond bonds has exceeded 33 trillion US dollars.

Why is the United States addicted to borrowing?

In recent years, the scale of US treasury bond bonds has risen faster and faster. It took over 8 months to break through $31 trillion to $32 trillion, which is 9 years ahead of the pre pandemic forecast; It only took about three months to break through $32 trillion to reach $33 trillion.

According to the forecast from the Congressional Budget Office in February of this year, the federal government's budget deficit for the fiscal year 2023, ending on September 30, 2023, will reach $1.4 trillion, approximately 5.3% of the annual GDP, and will continue to grow over the next 10 years. By 2023, the budget deficit will be 6.9% of GDP.

Some analysts believe that there are two reasons for the US debt to keep hitting new highs: first, the government always pays attention to immediate effects, ignoring income and investment efficiency when spending; The second is to not reflect on oneself when unable to make ends meet, but to overdraw towards the future, "eat more than you can afford", borrow money from the world, and transfer risks.

Xiao Lisheng, Director of the Global Macroeconomics Research Office at the Institute of World Economics and Politics, Chinese Academy of Social Sciences, pointed out that fundamentally, the long-term fiscal imbalance caused by the decline in economic growth is the main reason for the high debt burden of the US government. As early as 2017, then US President Trump signed the Tax Reduction and Employment Act, attempting to provide funding support for tax cuts through larger scale borrowing, which sparked global concerns about the US government's debt problem.

The "snowball" of debt scale is followed by the frequent occurrence of the US debt ceiling crisis.

The New York Times reported that the total amount of treasury bond reached a new high at a time when the federal expenditure was once again causing controversy and the government was facing suspension. The US fiscal outlook was worrying. It is reported that if Congress fails to pass long-term funding bills or short-term spending bills before September 30th, the government will once again face a shutdown crisis.

This is the second time the US government has faced a government shutdown crisis this year, and the previous one has just come to an end. At that time, the Democratic Party and the Republican Party played a game for several months before passing the so-called 2023 Financial Responsibility Act at the last moment before the US Treasury Department was expected to become insolvent in June.

The US's "high debt burden" is affecting the world

As an important financial tool, the scale of US government debt has been increasing year after year, and debt farce is recurring. This not only has a negative impact on its national credit, but also further limits the implementation space of its fiscal policy, damaging the long-term growth potential of the US economy.

The continuous rise of US government debt is not only detrimental to its own economic development, but also affects the global economy.

Xiao Lisheng believes that the repeated occurrence of default risks on US government debt will make the global financial system more fragile, especially emerging economies that may face various pressures such as capital outflows and currency depreciation. For example, in late May this year, the S&P 500 volatility index in the United States rose to a relative high of over 20, and the yield on one month US Treasury bonds broke through 6%. Investors' panic over US government debt defaults intensified the volatility in the capital market.

Analysts believe that theoretically, as the US dollar is an international currency, as long as the US fiscal revenue can cover government debt interest expenses, the US can continuously borrow new bonds to repay old ones, and the likelihood of debt default is low. But if the United States allows government debt to grow wildly, the market may seriously question the sustainability of US government debt and the true purchasing power of the US dollar. At that time, the credit of the US dollar will further collapse, endangering the US economy while causing a severe impact on the international monetary system and the world economy.