- By Anthony Zurcher
- North America Correspondent
Image source, Getty Images
Screen in New York shows U.S. national debt in real time as it rises
Light up the giant digital billboards with their ever-increasing dollar displays. Start calculating how much every American man, woman and child owes. Make comparisons to a household budget, credit card spending, or running a small business.
The national debt – and the legal cap on the amount of new debt the federal government can issue – is making headlines again.
First, some context. The US government finds itself in the enviable position of being able to issue new debt almost whenever it wants. U.S. Treasury securities are considered one of the safest and most stable investments in the modern world. In times of economic turmoil, U.S. debt is a refuge in the storm.
If the United States issues new government debt in the form of Treasury bills, bills, notes and securities, some investors, both in the United States and abroad, will be interested buyers.
Although the current US debt figures – $31 trillion (£25 trillion) and rising – are staggering in numerical and comparative terms, they do not represent an impending crisis.
The U.S. debt-to-gross domestic product ratio, which is generally a more illuminating measure of a country’s ability to manage its debt, stands at 128%.
This figure is lower than that of more than a dozen countries, including Japan, Greece and Italy.
The dispute over the national debt is therefore not an economic question but a political one. Republicans are trying to use the legal requirement that Congress set a cap on the amount of new debt the U.S. Treasury can issue to force the White House and Senate Democrats to agree to sweeping spending cuts in exchange for an increase in the debt ceiling.
This debt limit was first instituted by Congress in 1917, but increasing the amount was a formality for nearly a century.
In 2011, Republicans first used the limit – and the threat of a US debt default – to force then-President Barack Obama to the budget negotiating table.
Their efforts were somewhat successful as Mr. Obama and the Republicans agreed to cap government spending.
These caps, however, were frequently ignored and ultimately abandoned by the Republican-controlled Congress in 2018, which then increased discretionary spending by 16% (with the support of many Democrats).
In fact, Congress raised or removed the debt ceiling three times during Donald Trump’s presidency, in contrast to the debt battles fought during his predecessor’s term.
Now that a Democrat is back in the White House and one chamber of Congress controls Republicans, the battles over the debt ceiling have resumed once again.
This is a political game of chicken, where the stakes are as high as the consequences are avoidable.
