US debt has exceeded $40 trillion while the deficit reaches roughly 6% of GDP and annual interest costs approach $1 trillion.
Harvard economist Kenneth Rogoff warned that the United States may need a market shock or broader crisis to force action on its worsening fiscal position, Bloomberg reported.
US national debt has exceeded $40 trillion, the federal deficit is about 6% of GDP and annual interest payments are approaching $1 trillion, according to figures cited in the report.
Rogoff said rising real interest rates are increasing pressure on the federal budget while neither political party has shown willingness to make the spending cuts or tax increases needed to stabilize the debt trajectory. Public debt held by investors, foreign governments and the public is about $32.3 trillion.
He argued that the deficit is unusually large for a period without a recession. Mandatory spending on Social Security, Medicare and debt interest is consuming a growing share of federal resources, leaving less room for discretionary programs.
Rogoff said a loss of market confidence could trigger higher bond yields, a weaker dollar and forced austerity. The dollar’s reserve-currency status gives the US an important borrowing advantage, but elevated long-term Treasury yields suggest investors remain concerned about persistent deficits.
