Why the US economy is ringing alarm bells — SkimNews
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- US national debt crossed $40tn (£29.4tn) this week, climbing at roughly $90,000 per second or $7.8bn per day according to the Congress Joint Economic Committee, having doubled from just under $20tn at the start of Trump's first term in 2016.
- Interest payments on government debt are running 15% higher than the same period last year and now consume almost 20% of tax revenue — exceeding defense spending, according to Wharton School economist Mohamed El-Erian.
- Long-term US interest rates sit at multi-decade highs as investors demand higher returns, with tech firms borrowing eye-watering sums to spend on AI now competing with the federal government for bond-market cash, per UC professor Eric Swanson.
- The Congressional Budget Office forecasts debt climbing to about $64tn by 2036, and the US is nearing its $41.1tn debt ceiling, though economists note US debt at 126% of GDP is still below Japan and Italy.
- The Treasury Department bought back government debt Wednesday to boost bond demand and lower borrowing rates, but long-term yields bounced back up a day later, illustrating what El-Erian called a "flashing yellow light" rather than red.
- Households will face higher rates on mortgages, car loans, and credit cards, with lower-income Americans hit hardest, according to Committee for a Responsible Federal Budget president Maya MacGuineas.
Why it matters: With interest payments now larger than defense and the Treasury's one-day bond-buyback bounce quickly reversing, borrowing costs are feeding directly into what Americans pay on mortgages and credit cards. El-Erian said he sees "nothing happening" to lower the deficit over the next two to three years given the political focus on tax cuts, leaving the $41.1tn debt ceiling as the next pressure point.
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