Federal obligations soared over the past two years as a result of government spending packages meant to address the lockdown-induced recession. The newest debt milestone implies over $93,000 in liabilities per citizen and nearly $247,000 per taxpayer.
Both Republican and Democratic leaders have presided over surges in the national debt. Although President Barack Obama maintained budget deficits as large as $1.4 trillion during his first term, President Donald Trump ran a deficit nearing $1 trillion in 2019 — the year before the deficit more than tripled to $3.1 trillion as a result of stimulus spending, according to data from the Office of Management and Budget.
Policies enacted by President Joe Biden will contribute more than $4.8 trillion in new deficit spending between 2021 and 2031, according to an analysis from the Committee for a Responsible Federal Budget. Removing the effect of the American Rescue Plan, a stimulus package greenlit soon after President Biden’s inauguration, implies $2.5 trillion of new deficits.
“This is on top of the trillions of dollars we were projected to borrow before President Biden took office,” the group said. “Excessive borrowing will lead to continued inflationary pressures, drive the national debt to a new record as soon as 2030, and triple federal interest payments over the next decade — or even sooner if interest rates go up faster or by more than expected.”
While the American Rescue Plan is anticipated to spend $1.9 trillion, other omnibus proposals approved over the past two years include the $370 billion Bipartisan Infrastructure Law, the $80 billion CHIPS and Science Act, and $55 billion in humanitarian and military aid for Ukraine. Executive orders related to health care will lead to $175 billion in new deficits, while an increase in food stamp spending will add $185 billion.
The Inflation Reduction Act, which spends over $360 billion on climate and environmental programs, will cut deficits by an overall $240 billion as a result of new tax enforcement funds.
The higher spending occurs amid increasing tax burdens. The federal government is slated to collect roughly $5 trillion in nominal revenue from fiscal year 2022 — an increase from $4 trillion in fiscal year 2021, which was also a record amount, according to a recent analysis from the Tax Foundation. Federal collections are projected to reach 20.2% of gross domestic product, marking the highest level in modern history, during which collections have averaged 17.2% of economic output.
Price levels between August 2021 and August 2022 rose 8.3%, according to data from the Bureau of Labor Statistics, marking a slight moderation from an 8.5% year-over-year increase in July and a 9.1% year-over-year increase in June. As core inflation continues to climb, the Federal Reserve responded last week by increasing the target federal funds rate by 0.75% — a move that triggered a stock market selloff and sent the Dow Jones more than 1,500 points lower than the level seen on the day of President Biden’s inauguration.
The higher interest rate environment will place additional pressure on federal budgets as policymakers are forced to allocate a greater portion toward servicing debt.