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Soaring US national debt may translate into a real disaster when supercharged by internal political fighting or de-dollarization among top emerging economies, US observers warn.
The Congressional Budget Office (CBO) forecasts that the US national debt will hit $50.7 trillion by 2034, but the true figure "surely will be much bigger," wrote William Pesek, an award-winning journalist and author, for the Asia Times.
The CBO projected on June 18 that US debt would reach 122 percent of the gross domestic product (GDP) by 2034, far surpassing the nation's record-high public debt-to-GDP ratio of 106 percent in the aftermath of World War II. The watchdog also expects that interest costs for maintaining the debt will climb to $892 billion in 2024 (from $352 billion in 2021).
Pesek named defense funding, social safety net outlays and tax cuts unmatched by revenue increases as being the major drivers behind the debt growth, adding that they would become even costlier in the future.
He also quotes Goldman Sachs economists as predicting that the US debt-to-GDP ratio will hit 130 percent by 2034, i.e. 8 percentage points higher than the CBO estimates. Judging by the present dynamics, it could be far higher than that, according to the journalist.
The Wall Street Journal's Gerald F. Seib appears to share Pesek's concerns: "Over the centuries and across the globe, nations and empires that blithely piled up debt have, sooner or later, met unhappy ends."
The Washington Post's Jacob Bogage echoes his counterparts in referring to the spending spree under the Trump and Biden administrations, which included huge tax cuts, various social programs and increasing defense expenditures.
"[Most recently], besides the annual appropriations, lawmakers approved a $95 billion foreign aid bill to support Ukraine, Israel and Taiwan and make investments in the US industrial base, and Biden announced plans to forgive billions of dollars in student loans," the correspondent noted.
When it comes to Ukraine, Congress has approved nearly $175 billion of funding and military assistance to support the Kiev regime and allied nations since 2022, as per the Committee for the Responsible Federal Budget. This spending has been repeatedly questioned by some US lawmakers, who referred to Kiev's corruption, non-transparency and military failures. To complicate matters further, American lawmakers are complaining about US primary defense contractors tremendously overcharging the US government.
Meanwhile, Ukraine funding constitutes a fraction of the US growing military spending that rose by 2.3 percent from 2022 to reach $916 billion in 2023, or 68 percent of total NATO military spending, according to the Stockholm International Peace Research Institute (SIPRI). These expenditures only add to America's bloated national debt.
According to Pesek, "this slow-motion economic disaster" related to Washington's inability to balance its spending "could be sped up by political squabbling or by de-dollarization efforts among top emerging markets."
He particularly refers to Biden's economic policies and protectionist measures which are not making the US economy more resilient. According to the journalist, the White House's latest 100 percent tariffs on China-made electric vehicles have hurt "global faith in the dollar or US Treasury securities" (of which the People's Republic holds around $700 billion).
He warns that Global South countries are "viewing the US less and less as an adult in the room when it comes to economic and geopolitical affairs."
"The most obvious example of disillusionment over US fiscal excesses is the pivot away from the US dollar," Pesek notes, adding that there is no sign that the US government is ready to overhaul its economic approach.
"Nor is it safe to bet on the US debt only rising to $50 trillion a decade from now. As the real figure exceeds even the worst expectations, global markets could be in a world of hurt. And Washington will make it easy for Global South nations hoping to sideline the dollar," he concludes.
https://sputnikglobe.com/20240622/debt-disaster-why-global-south-increasingly-sidelines-the-us-dollar-1119059080.html
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