Data on the US debt dispute: So much debt weighs on the US

The budget dispute in Washington is developing into a risk factor for the global economy. How deep is the mighty superpower in the lousy? Data from official sources shows totals in dramatic proportions.

The dispute over US government spending and the looming impact on the global economy sheds light on the United States’ financial leeway. In the US capital Washington, DC, Democrats and Republicans have been wrestling for weeks over the long overdue increase in the debt ceiling.

Under the influence of partisan power games, is the United States no longer able to get its finances under control? Concern is growing around the world. In fact, the US national debt has grown dramatically over the past two decades, as official figures show:

The sums seem truly enormous: In the year of the Lehman crisis in 2008, the debt level passed the 10 trillion dollar mark for the first time. Not even ten years later, the threshold of 20 trillion dollars was reached. The coronavirus pandemic added further burdens. Regardless of whether it was under Bush, Obama or Trump: For years, the USA has been spending far more money than it receives in tax revenue. The result: an enormous annual minus, the mountain of debt is getting higher and higher.

In the meantime, this development has assumed alarming proportions: the deep rifts between Democrats and Republicans could mean, it is said, that the USA could actually soon slide into insolvency. It would be the first time a US government has defaulted on its debt.

Even the massive sum of just under $4.9 trillion in tax revenue is not enough to cover all government spending. Last year, the US government also had to apply to Congress to borrow $1.375 trillion in new debt to stay afloat financially.

The problem: Government spending consists largely of long-term, well-planned connections. Forecasts by budget experts indicate that pension costs, for example, will continue to rise in the coming years. In addition, there is the world’s largest military budget – and urgently needed investments to expand the infrastructure. Only: The incumbent US President Joe Biden cannot simply expand the financing through new debts.

In the United States, the debt ceiling, which has been firmly anchored since 1917, generally restricts the government’s financial leeway. This limit is currently 31.4 trillion dollars (around 28.6 trillion euros).

The USA had already reached the limit in January. Since then, the US government has only been delaying the threat of insolvency with “extraordinary measures”. However, the possibilities for this will soon be exhausted.

US Treasury Secretary Janet Yellen assumes that the US will probably reach the limit in early June. “There is no time to lose,” she warned of the potential impact on the global financial system.

The budget limit has been raised repeatedly in recent years and decades. And well into the 2000s, this was undisputed domestically and largely silent. Only Congress can raise the debt ceiling. A majority of MPs and Senators must agree. Here Biden faces massive resistance.

Because this time the Republicans are getting in the way: Although the deadline is approaching and government agencies are on the verge of insolvency for wages, salaries, pensions and social benefits, they only want to release the renewed increase under strict conditions. Biden and the Democrats should promise significant spending cuts and take political responsibility for them.

There are serious reasons why this power gamble with the state budget is causing such a stir on the markets: Up to now, the USA has been the most reliable debtor par excellence. US government bonds lie dormant in the portfolios of large investors in China, Japan and Europe. Lending money to the US government has always been safe and lucrative.

On the books of many banks, US bonds form a kind of stable security. This time, however, US politics no longer seems to rule out the possibility of default. The possible shock waves in the global financial system are apparently making insiders like Yellen break out in a cold sweat.

Debts amounting to 30,929 billion dollars – in words almost thirty-one thousand billion – and an annual deficit of 1,375 billion most recently: US borrowing alone exceeds the spending volume of the German national budget by almost three times.

Some of the data on the US state budget comes directly from the US Treasury Department, partly from the budget office in the White House or from the stocks of the Congressional Budget Office (CBO), a kind of audit office that tightens US state finances on behalf of the Senate and House of Representatives keeps an eye on.

The sums seem huge, but compared to the US economy and the indebtedness of other countries, the finances of the United States are not necessarily in the catastrophic range. In terms of the debt ratio, for example, the US is well above the German level.

However, the US figures are still a long way from Greek conditions from the time of the euro crisis. Only with the special burdens of the coronavirus pandemic did the US quota jump to 138 percent of total annual economic output.

In Germany, this key figure is currently 66.3 percent – and thus still above the Maastricht limit, despite all savings efforts. And: Unlike in the USA, there is no formal debt limit in Germany.

In view of the dramatic prospects, however, direct comparisons are tricky: the United States, in terms of its political culture, government spending, tax revenue and the economic power behind it, turn a completely different wheel than the Germans.

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