Driven in most parts by a response to the coronavirus pandemic, U.S. national debt has surged more rapidly than projected in recent years. As of Monday, the total public debt outstanding reached $30,012,386,059,238.29, an increase of nearly $7 trillion since January 2020, an amount equivalent to 13.3% of the total global debt. Since January 2020 the U.S. has printed 80% of all U.S. dollars in existence.

Reaching levels not seen since World War II, the debt as a share of the economy reached 100% in 2020. The overall debt is split into two categories: so-called intragovernmental holdings, to the amount of $6.5 trillion of the gross national debt, is debt that the government owes to itself, and $23.5 trillion in debt held by the public and thus owed by the U.S. government to outside creditors.

Passing the milestone of $30 trillion comes as a surprise to few. Some budget watchers have been warning that the nation’s fiscal path was unsustainable even before the government spent some $5 trillion to support the economy and combat the novel coronavirus. The recent spending also comes as a result of long-term federal obligations for programs including Medicare and Social Security.

“We’re on an unsustainable path,” Federal Reserve Chair Jerome Powell told Congress last month: 

“Debt is not at an unsustainable level, but the path is unsustainable — meaning it’s growing faster than the economy, meaningfully faster than the economy. We have to address that over time. We will address it over time. And the better way to do it is soon.”

However large the debt, some observers say the new spending is affordable given that the economy continues to grow, interest rates remain at historically low levels, though at least three rate hikes are expected during 2022, and the demand for U.S. bonds is strong.

Alan Rappeport of The New York Times says:

“And some economists argue that a more recent economic phenomenon — inflation — may have a silver lining in that it could chip away at the nation’s debt burden,”

Harvard Economist Kenneth Rogoff tells the Times that other economic issues are more pressing than the debt. “You would rather have no debt, of course,” Rogoff says. “But compared to other issues at the moment that’s not the principal problem.”

To curb the record-high inflation, not seen since 1982, The Federal Reserve has signaled to begin raising interest rates, most likely beginning in March when the Fed has finished tapering down its market stimulus to zero. “With inflation well above 2% and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate,” the Fed said in a statement last week after a meeting of its policy-setting committee.

However, higher rates will increase the government’s borrowing costs, making it more expensive to carry the unprecedented debt load. “A larger amount of debt makes the United States’ fiscal position more vulnerable to an increase in interest rates,” the Congressional Budget Office has warned.

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