On Friday, the Treasury Department officially released data indicating that the federal borrowing has exceeded $32 trillion on US national debt. This milestone was reached within a span of less than two weeks after President Biden enacted legislation suspending the debt ceiling.
The contentious bill, which includes substantial spending cuts as per the demands of House Republicans, grants the government unrestricted borrowing capabilities until the conclusion of 2024, coinciding with the expiration of the debt ceiling suspension.
A Surge in Federal Borrowing
Upon President Biden signing the bill into law on June 3, the recorded national debt was reported to be $31.47 trillion. However, on the immediate business day subsequent to the suspension of the debt ceiling, federal borrowing purportedly surged by almost $400 billion.
This development signifies the accumulation of delayed borrowing requirements, including payments to federal worker retirement plans that the Treasury Department deliberately postponed to avert breaching the imposed ceiling. As of today, the national debt stood at $32.04 trillion.
During the initial eight months of the ongoing fiscal year, a noticeable pattern emerges wherein the federal government’s expenditures surpass its revenue, leading to the continuous growth of the national debt by $1.2 trillion.
Meanwhile, projections indicate that annual budget deficits of $1 trillion or more will persist in the foreseeable future, based on existing legislation. Nonetheless, it is important to note that these deficits are considerably lower compared to the massive shortfalls incurred by the government throughout the course of the COVID-19 pandemic.
Government’s COVID-19 Response Resulted in Unprecedented $3.1 Trillion Expenditure
In the wake of the pandemic’s arrival, reports indicate that the government faced an unparalleled situation, spending a staggering $3.1 trillion beyond its revenue. Subsequently, the budget deficit experienced a slight decline, reaching $2.8 trillion in 2021. President Biden has since touted this deficit reduction achievement following the conclusion of the pandemic emergency.
However, concerns among conservatives persist as annual deficits of $1 trillion or more continue to raise alarm bells. Of particular worry is the fact that the national debt has consistently exceeded the size of the U.S. economy in recent years.
Conversely, the enactment of the Inflation Reduction Act, ongoing military assistance to Ukraine, and extensive opposition within Congress have set the stage for substantial spending reductions. As a result, the annual budget deficit is anticipated to approach the $2 trillion mark in the forthcoming years.
Furthermore, the Federal Reserve’s implementation of higher interest rates is expected to amplify the financial burden of national debt interest payments to levels unseen in decades. Consequently, an increased reliance on borrowing will be necessary to fulfill these obligations and maintain current payment schedules.
Cryptocurrencies as Safe Havens and Inflation Hedges
The rising national debt, growing budget deficits, and increased government expenditure have fueled increased interest in the crypto industry. Concerns over the long-term viability of existing financial systems in the face of growing debt seem to have prompted investors to seek alternative assets.
As a result of this, cryptocurrencies, particularly established digital assets such as Bitcoin, are gaining traction as potential safe havens due to their decentralized nature, limited supply, and immunity to government intervention.
The full impact of these economic events on the crypto business is unknown, but rising national debt, expanding budget deficits, and the need for stability and security are expected to fuel increased interest and investment in cryptocurrency.