Overstretch: The Long Shadow Of Soaring US Debt

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If the past year was dominated by the huge human costs of COVID-19, the next few years will be about its economic aftermath, including the alarming rise of US debt. What’s needed is multilateral cooperation - a new 'Grand Alliance.'

On Friday, Congressional leaders failed to secure a bipartisan deal on a $900 billion pandemic relief package. A government shutdown was avoided only with a 2-day extension. 

A protracted shutdown would amplify the risks for pandemic escalation and economic crisis, amid the long-awaited vaccine rollout. Bipartisan tensions are compounded by the impending Georgia Senate runoff races in January that will determine control of the chamber in the Congress. 

In 2019, the Congress suspended the debt ceiling until after the 2020 presidential election. While it sought to avoid a repeat of the 2011 and 2013 debt crises during an election year, new spending contributed to Trump’s new military rearmament drive. 

The new Congress must decide the future of the debt ceiling by summer 2021. 

High debt burden

By the year-end, COVID-19 cases worldwide will be close to 80 million. As a result of utter mismanagement, US figure will be close to 20 million. 

While the pandemic continues to spread and the health system is overwhelmed, the Trump White House has taken record amounts of debt in record pace. 

During his campaign, Trump pledged to eliminate US national debt in 8 years. At the time, total public debt was $19.6 trillion. In the past 4 years, it has soared to more than $27 trillion, by almost $8 trillion. It was an achievement of sorts. What former President Obama achieved in 8 years, Trump did in just 4 years.

Of course, all major Western economies have taken record amounts of debt during the global pandemic. But United States is not like other economies. First, it has more COVID-19 cases relative to all other major economies. Second, US remains a world anchor economy. Third, US dollar dominates international transactions. As a result, excessive US debt will have disproportionate global spillovers.

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Disclaimer: Dr. Dan Steinbock is an internationally recognized strategist of the multipolar world and the founder of Difference Group. He has served at the India, China and America Institute ...

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