The situation around the US national debt can no longer be ignored, and possible solutions to it are difficult to implement, stated founder of Rusal Oleg Deripaska in his Telegram channel.
“The size of the US debt, as well as annual interest payments (already $1.8 billion per day) is impossible for almost anyone not to notice. It is clear that there are solutions, and not only those that have been announced, namely to increase the rate of economic growth to a conditional 10% per year – this is hardly possible in today’s American society,” he wrote.
Another way out of the situation could be to cut spending by $2 trillion a year, but such a step would be “suicide” for the political elite, Deripaska believes. Washington could forget or forgive the national debt, he noted, but in this case, a devaluation of the dollar by more than half would be inevitable, which would be a serious blow to the poorest strata of American society.
“But some combination of these decisions will have to be selected by the next administration,” he concluded.
On September 15, the US national debt exceeded $33 trillion for the first time in history. The previous time the US reached the national debt limit of $31.4 trillion was on January 19.
June 3 US President Joe Biden signed a law to raise the national debt ceiling, which will prevent a possible default and avoid a “catastrophic” blow to the economy, the White House noted. According to the document, the US Code’s cap clause is suspended until January 1, 2025, but at the end of the freeze period, effective January 2, 2025, the ceiling may be increased in accordance with current need. According to forecasts, by 2030 the US national debt could exceed $50 trillion.
On May 28, the Speaker of the US House of Representatives, Republican Kevin McCarthy, announced that an agreement in principle had been reached with the White House to prevent a sovereign default. It follows from it that the government will be obliged to comply with new restrictions on budget spending, subject to the actual abolition of the mechanism.
In August, Fitch lowered US rating from AAA to AA+. The changes are due to an expected deterioration in the fiscal situation over three years, a high debt burden and weakening governance. In addition, the reasons for the downgrade include the growing budget deficit of the country, an increase in public debt, an increase in the Federal Reserve rate and the threat of recession. The White House categorically disagreed with the agency’s decision.