US Debt Spikes Above $17 Trillion After Ceiling Lifted
Saturday, 19 Oct 2013 07:54 AM
The nation's debt climbed by a record $328 billion on Thursday alone, reports The Washington Times, the first day the federal government could borrow money under the agreement. The debt is now at a record $17.075 trillion and climbing, according to the Treasury Department.
The $323 billion increase is nearly $100 billion over a previous record of $238 billion that was set two years ago, and came as the government replenished its "extraordinary measures” funding from the money it's been borrowing since may while trying to avoid the nation's debt ceiling.
Federal law allows the government to replenish funds when there is new debt space, and the Treasury Department back in May started borrowing $400 billion from other funds while it awaited a final deal from Congress and President Barack Obama.
The nation's debt ceiling caps how much the government can owe, but the new deal basically removes that deal, setting a deadline instead of a dollar amount, so debt can go up by as much as is spent between now and Feb. 17.
Democrats insisted the debt increase be "clean," and allows Obama to pay for bills he and Congress have already amassed without encouraging new spending. But Republicans wanted strings attached, but instead settled on a bill that reopened the government and included earmark projects.
The debt cap increase is the sixth one since Obama took office in 2009, reports Fox News, when the nation's debt was at $10.6 trillion, so the $17.05 trillion mark is an increase of nearly 60 percent.
The debt cap went up three times while Democrats controlled Congress and another three times when Republicans took over in the House.
The mounting debt is alarming experts, who say the nation is entering into dangerous territory.
"Both houses should act quickly to stop the madness," said Maya MacGuineas, head of the Committee for a Responsible Budget and the Campaign to Fix the Debt, told Fox. She's happy the shutdown is over, but calls the last-minute deal "incredibly disheartening," and says the nation's debt is a "fire" that could "get out of control at any moment."
On Thursday, though, Obama said the deficit is "getting smaller, not bigger," a technically true statement, but Republican Sen. Marco Rubio of Florida said the nation still has an "unsustainable problem in place."
The high numbers are not easy to understand, and the nonpartisan Congressional Budget Office is warning that the future could be dire if the climbing debt rate isn't snowed.
In its analysis, the CBO explained that the government is expanding at historic rates, adn between 2009 and 2012, deficits were larger in relation to the size of the economy than at any time since 1946.
And while experts project the deficit to fall in upcoming years, they say it will climb again because of interest rates and entitlement programs.
As a result, the CBO reports, interest on the debt will rise to five percent of the
The CBO estimates that by 2038, interest on the debt will rise to 5 percent of the gross domestic product, as compared to the historical average of two percent, leaving less money available for spending.
But so-called entitlement programs, such as Medicare, Medicaid, and Social Security are expected to soar, reports the CBO, doubling by 2038 to equal 14 percent of the GDP and causing spending on everything else to drop.
Rubio complained Obama has resisted making major changes to the programs because liberals don't want changes to them.
And while the debt ceiling is suspended for now, eventually the nation will need to pay its bills, meaning 2014 could look more bleak, reports Reuters. When the new debt cap resets in February to whatever level the debt has reached by then, the new debt ceiling date comes while tax refund checks are being mailed out, and financial experts expect a new cap of at least $17.3 trillion.
Goldman Sachs economist Alec Phillips said in a report that he thinks the Treasury will run up on the cap by mid-March, but "if revenues are higher than expected or tax refunds are lower than expected, the date could be pushed (out)slightly further."
If the borrowing capacity can be stretched until the end of March, a $30 billion dividend payment from Freddie Mac could allow a bit more breathing space, said Phillips.
Related stories:
National Debt Set to Double Before Obama Leaves Office
Myth of the US National Debt
National Debt Up More Than $6 Trillion Under Obama
© AFP 2013
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