America’s Soaring Debt Pile

Director of the US Congress’s independent fiscal watchdog, Philip Swagel, has warned the Financial Times that America risks a Liz Truss-style market shock with its soaring debt pile. The short lived British prime minister’s “mini” Budget in September 2022 resulted in a sudden surge in UK government bond yields that caused havoc across the UK markets. Swagel is sounding the alarm to fend off the complacency in the US market to the record levels of US debt. The Congressional Budget Office projects Amerca’s debt-to-GDP ratio will surpass the Second World War high 106%. Net interest payments are at 3% of GDP and expected to keep rising. As yields rise, this will raise the cost of borrowing and hurt economic growth, and in an election year, neither presidential candidate is looking to tighten the fiscal belts. Sooner or later American needs bipartisan efforts to resolve how American may responsibly fund itself. Otherwise, it may be panicked bond traders that force the issue. According to IMF chief-economist Pierre-Olivier Gourinchas,  “something will have to give”.

What do you think, are you concerned about the US debt?

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