New Delhi: The US national debt has crossed $40 trillion for the first time. The milestone has heightened worries over rising borrowing costs and the country’s ability to manage its finances with government spending on the rise.
Because treasury bonds are a major destination for international capital, the US debt story extends far beyond Washington. If yields rise, investors may find US assets more attractive and move money towards the American market. The AI boom is drawing investment towards the United Staates from countries, including India. Higher Treasury yields could strengthen that movement by offering investors better returns on US government debt.
Data from the US Treasury showed that total outstanding federal debt stood at $40.05 trillion on August 18. The International Monetary Fund (IMF) estimates that US government debt is now equal to 125.8% of the country’s gross domestic product (GDP). The debt has doubled over the past decade, from around $20 trillion in 2016. The Congressional Budget Office (CBO) expects it to reach about $64 trillion by 2036. The CBO estimates that the government is approaching the $41.1 trillion debt ceiling. Heavy government spending during the Covid-19 pandemic added trillions of dollars to the debt.
It includes Treasury bills, notes and bonds held by investors and other holders. The rise has also pushed the United States closer to its statutory debt limit. Several factors have contributed to the hike.
