The United States has reached a historic milestone with its public debt surpassing $35 trillion, marking it as the largest in the world in absolute terms. Despite a strong economy, the debt-to-GDP ratio stands at approximately 123 percent for 2023, trailing only behind Japan and Italy.
Political debates rage on, with Republicans attributing the surge to what they call \"reckless\" spending under the Biden administration. Meanwhile, Democrats counter by highlighting the substantial debt accumulated from the Trump tax cuts.
Beyond domestic politics, significant international factors play a crucial role in the growing debt. The U.S. dollar's status as the global reserve currency inflates its value relative to other currencies, leading to a trade deficit as domestic production struggles to meet demand.
Countries facing trade deficits typically have two paths: higher unemployment due to reduced domestic production or increased debt to sustain employment and demand. The U.S. has favored the latter, reinforcing the dollar's international standing by providing ample dollars for global trade and accumulation.
This cycle has profound implications for the global economy. While large U.S. budget deficits bolster domestic demand and expand trade deficits, they also create demand for international products, contributing to global economic growth.
Reference(s):
U.S.'s record debt: Global currency status and economic consequences
cgtn.com
