America’s Debt Reaches $30 Trillion, FED Tries to Fight Inflation

The United States reached $30 trillion in debt for the first time in Tuesday’s fiscal report, a sobering sign of the deteriorating long-term health of its economy in the face of inflation and the potential of higher interest rates to be implemented.

The country has spent trillions of dollars fighting the pandemic, according to new Treasury Department estimates. The $5 trillion was borrowed to provide additional unemployment benefits, small business assistance, and stimulus payments.

Inflation-fighting mode

According to CNN, as a result of years of record-low interest rates, the Federal Reserve is turning its focus to inflation-fighting activities. The Fed intends to begin raising interest rates for the first time since 2015. Increased borrowing prices will only make it more difficult to pay off the nation’s mountain of debt.

The Peter G. Peterson Foundation, an organization dedicated to bringing awareness of the fiscal challenge, estimates that interest costs alone will exceed $5 trillion over the next ten years, making up nearly half of all federal revenues by 2051.

The Federal Reserve’s Chairman, Jerome Powell, recently recognized that the existing trajectory of the fiscal crisis cannot be maintained.

As per the report, Powell said that debt is not unsustainable, but its course is insufficient, meaning it is expanding faster than the economy. They must treat it gradually, and they will work on it.

While the national debt continues to grow, interest payments as a percentage of GDP are down. Many economists believe this is not a catastrophe of immediate proportions.

Helping the nation’s high debt load

Several economists deemed the borrowing binge necessary to help the United States recover from the pandemic, but now the country is drowning in debt that it would take more than America’s annual economy to pay off.

According to New York Times, in spite of the nation’s high debt burden, some economists argue that the growing economy and the low-interest rates, as well as the overwhelming willingness of investors to purchase US Treasury securities, are helping protect investors from the adverse effects of the nation’s high debt load.

In many cases, these securities enable the government to borrow money relatively cheaply, which then enables the government to invest money into the economy.

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