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U.S. National Debt Surpasses Record $34 Trillion

WASHINGTON (AP) ÔÇö The federal government’s gross national debt has exceeded $34 trillion, a historic high that foreshadows future challenges in improving America’s economic and political landscape.

The U.S. Treasury Department’s report on U.S. finances, issued on Tuesday, highlights the tension in a politically divided Washington that could potentially result in a government shutdown without an annual budget in place.

Republican lawmakers and the White House reached an agreement last June to temporarily raise the nation’s debt limit, avoiding the risk of a historic default. This agreement is set to expire in January 2025.

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Factors Contributing to the $34 Trillion National Debt

The national debt reached $34 trillion earlier than pre-pandemic projections, with the Congressional Budget Office’s January 2020 estimates placing gross federal debt exceeding $34 trillion in fiscal year 2029.

The debt grew at a faster rate than expected due to a multi-year pandemic that began in 2020, causing a significant economic downturn. Both the Trump and Biden administrations borrowed extensively to stabilize the economy and facilitate recovery, but this led to a surge of inflation, pushing up interest rates and increasing the government’s debt servicing costs.

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Impact of the National Debt on the Economy

Currently, the national debt does not appear to have a detrimental effect on the U.S. economy, as investors continue to lend money to the federal government. However, in the long term, the debt’s trajectory could jeopardize national security and major social programs, such as Social Security and Medicare.

Foreign buyers of U.S. debt have decreased their holdings, and the debt’s continued increase poses potential risks to the overall financial stability and economic growth.

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Personal Implications of the National Debt

While the debt currently averages about $100,000 per person in the U.S., it has not yet posed a direct threat to economic growth. However, the long-term consequences of rising debt levels could lead to increased inflation, elevated interest rates, and higher costs of repaying the national debt.

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Policies and Partisan Differences in Reducing the National Debt

Both Democrats and Republicans advocate for debt reduction, but they differ in their approaches. The Biden administration advocates for tax hikes on the wealthy and corporations, alongside funding domestic programs and increasing IRS budgets. On the other hand, Republican lawmakers propose large cuts to non-defense government programs and the repeal of clean energy tax credits and spending.

How AI legalese decoder Can Help: The AI legalese decoder can offer comprehensive analysis of proposed policies to reduce the national debt, providing insights into the potential effects of tax hikes, spending cuts, and IRS funding on the economy and government finances.

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