The U.S. federal government has reached a historic milestone, with its total public debt surpassing $34 trillion for the first time, according to the U.S. Treasury Department’s latest report.
This alarming increase comes as members of Congress prepare for upcoming battles over federal funding.
The Daily Treasury Statement released on Friday revealed that the total public debt outstanding had risen from $33.911 trillion to $34.001 trillion, marking a significant escalation.
The portion of the debt that contributes to the federal debt ceiling also saw a notable increase, climbing from $33.794 trillion on Thursday to $33.89 trillion on Friday.
It’s worth noting that this category, known as “debt subject to limit,” excludes certain factors such as the unamortized discount on Treasury bills and zero coupon bonds, debt issued by the Federal Financing Bank, and guaranteed debt of select agencies.
This milestone follows closely on the heels of the federal debt surpassing the $33 trillion mark in September.
This surge in debt can be attributed to a combination of falling tax revenues and escalating federal expenditures, contributing to the overall fiscal strain.
Congress is set to reconvene in Washington in the coming week, facing critical deadlines on January 19 and February 2 for finalizing government spending through September.
This situation is complicated by Republican demands to reduce discretionary spending for fiscal year 2024 below the previously agreed-upon caps from June.
Additionally, lawmakers are exploring the possibility of passing emergency aid packages for Ukraine and Israel, which may involve unrelated provisions related to U.S. border security.
Failure to approve the fiscal year 2024 spending bills could result in government agencies in Washington shutting down, further complicating the already challenging political landscape with the upcoming November presidential and congressional elections.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, expressed her concern about the $34 trillion federal debt, calling it a “truly depressing achievement” that stems from the reluctance of political leaders to make tough fiscal decisions.
She remains hopeful that policymakers will take steps to reduce borrowing through a combination of raising taxes, cutting spending, and establishing a fiscal commission.
In response to the debt increase, White House spokesperson Michael Kikukawa attributed the rise to Republican-passed tax cuts in 2017, which he characterized as “trickle-down debt” benefiting corporations and wealthy Americans.
Kikukawa noted President Biden’s plan to reduce U.S. deficits by $2.5 trillion over a decade, primarily by increasing taxes on large corporations and the wealthy, while also cutting spending on pharmaceuticals and tax breaks for oil companies.
This sets the stage for a contentious debate on fiscal policy and priorities in the coming weeks and months.