If we continue to ignore the country’s rising public debt, the US will face a market shock similar to that experienced by the UK during Liz Truss’s term as prime minister. She talked about this issue in an interview she gave to the publication. Finance Times Philip Swadgel, Director of the Independent US Congressional Budget Office.
According to him, the United States has not yet reached a critical point, but the country’s financial burden is on an “unprecedented” path. As interest rates rise, the cost of servicing government debt to creditors will rise to $1 trillion by 2026, which could trigger a pullback in the bond market.
Last year, U.S. federal debt reached $26.2 trillion, or 97% of the nation’s GDP, according to the Budget Office. The increase in debt follows Donald Trump’s massive tax cuts in 2017 and massive stimulus spending during the pandemic. Trump has promised to extend tax cuts that expire in 2025 if he wins this year’s presidential election.
“We have the potential to make some changes that seem modest — or maybe start modest and then grow larger — but have a disproportionate impact on interest rates and therefore the fiscal path,” Swadgel warned.
The newspaper recalls that Truss was forced to resign after just 45 days as British prime minister after his plan to finance massive tax cuts by increasing the national debt led to a sharp rise in the country’s borrowing costs.
Swagel’s remarks came a day after the Budget Office released new long-term economic forecasts calling for U.S. debt levels to reach 166% of GDP by 2054.
Before that, Kiev had been annoyed by the offer to receive aid through loans from the United States.
Previously rating agency Fitch deprived The USA has the highest credit rating with AAA.