America’s gross national debt topped $35 trillion for the first time Monday, a reminder of the nation’s grim fiscal predicament as legislative fights over taxes and spending initiatives loom in Washington.
The Treasury Department noted the milestone in its daily report detailing the nation’s balance sheet. The red ink is mounting in the United States more quickly than many economists had predicted as the costs of federal programs enacted in recent years have exceeded initial projections.
The leading presidential candidates, Vice President Kamala Harris and former President Donald Trump, have said little about the nation’s deficits on the campaign trail, suggesting that the economic problem will only worsen in the coming years. Deep differences between Republicans and Democrats on policy priorities and resistance within both parties to enacting cuts to the biggest drivers of the national debt — Social Security and Medicare — have made it difficult to reduce America’s borrowing.
The Congressional Budget Office said last month that the US national debt is poised to top $56 trillion by 2034, as rising spending and interest expenses outpace tax revenue.
High interest rates have made it harder for the United States to manage its debt burden. Some federal programs created during the pandemic, such as the Employee Retention Tax Credit, have been more costly than budget experts predicted because of fraud and abuse. There has also been stronger-than-expected demand for tax credits that have been offered through the Inflation Reduction Act of 2022, inflaming annual deficits.
The Treasury Department said Monday that it borrowed $234 billion from April to June, which was less than it anticipated, and that it expects to borrow $740 billion from July through September.
Treasury Secretary Janet Yellen said in June that the US debt load remained reasonable given the size of the economy and that she was focused on keeping interest costs stable.
The Biden administration in its most recent budget proposed $3 trillion in deficit reduction over a decade, largely from raising taxes on high earners and corporations. The White House argued Monday that Republicans would worsen the national debt if they take power in Washington.
“While congressional Republicans want to blow up the debt again with $5 trillion in more Trump tax cuts — while making hardworking families pay the price by cutting Social Security, Medicare and the Affordable Care Act — President Joe Biden’s budget would lower the deficit by $3 trillion by making billionaires and the biggest corporations pay their fair share and cutting spending on special interests,” Jeremy M. Edwards, a White House spokesperson, said in a statement Monday.
Republican lawmakers disagreed with that assessment. Rep. Jodey Arrington, R-Texas, the Republican chair of the House Budget Committee, said Monday that Republican leadership next year is “our last best hope to restore fiscal responsibility before it’s too late.” The budget office predicts that annual interest costs will rise to $1.7 trillion in 2034 from $892 billion this year. At that point, the United States would be spending about as much on interest payments as it does on Medicare.
In January, lawmakers in Congress will have to once again find a way to raise the nation’s debt limit, which was temporarily suspended last year after a protracted fight between Republicans and Democrats over spending priorities.
Congress will also be scrambling next year to decide what to do about expiring tax cuts that Trump enacted in 2017. Trump has called for extending the tax cuts, which budget groups say would cost about $4 trillion over 10 years. Democrats want to preserve the ones that have benefited the middle class while increasing taxes on companies and the rich.
Harris has yet to unveil an economic plan, and it is unclear how her policy priorities might diverge from those of the Biden administration. As a presidential candidate in 2019, she called for raising the corporate tax rate to 35% from 21%, but she also proposed new tax credits for the middle class and pay increases for teachers, which would be paid for by increasing the estate tax.
At the Republican National Convention this month, Republicans made no mention of the national debt in their party platform. Trump suggested that he would simultaneously cut taxes while reducing the debt, an approach that failed during his first term. Trump has proposed raising revenue through higher tariffs on imports, but those would probably be used to help offset tax cuts.
The nonpartisan Committee for a Responsible Federal Budget said in a report last month that Trump approved $8.4 trillion in new borrowing while in office. Biden has approved $4.3 trillion during his first three years and five months in the White House.
House Republicans have offered proposals for curbing federal spending and have blamed Democrats for failing to embrace such policies.
Meanwhile, budget watchdogs lament that the presidential candidates have not offered plans to reduce the nation’s debt.
“The election is less than 100 days away, and we’re projected to add another $1 trillion more in debt even during this short period,” said Michael Peterson, CEO of the Peter G. Peterson Foundation, which promotes fiscal restraint. “We can’t keep pretending this is not a problem.”
Alan Rappeport
The writer is an economic policy reporter at the New York Times, based in Washington. He covers the Treasury Department and writes about taxes, trade and fiscal matters.
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