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- The US national debt topped $22 trillion on Monday, and it’s the first time the debt has ever hit that threshold.
- The record follows a year in which the budget deficit was $779 billion, the highest since 2012, and the amount of debt issued topped $1.3 trillion, the most since 2010.
- A debate is growing around how much the nominal amount of government debt really matters to the economy.
The US national-debt load surpassed $22 trillion on Monday, according to the Treasury Department. It’s the first time that the total outstanding public debt has topped that threshold.
A little less than $16.2 trillion of that debt was held by the public in the form of Treasurys, while the other $5.8 trillion was intragovernmental holdings.
The amount of debt being accumulated is also accelerating because of recent changes. The budget deficit in fiscal year 2018 (October 2017 to September 2018) hit $779 billion. The deficit measures the amount of revenue the government pulls in minus the government’s expenditures.
Additionally, a Treasury report estimated the total amount of debt issued during 2018 topped $1.3 trillion: the largest issuance of new debt since 2010.
The recent acceleration in outstanding debt was driven by two recent legislative changes. The first was the tax-reform law pushed by President Donald Trump and passed by the GOP. The law is projected to add about $1.5 trillion to the debt over the first 10 years it is in effect.
The second was the large, bipartisan budget deal that passed Congress. The combination of slashed tax rates, lowering government revenue, and increased spending adds up to a higher debt load.
Traditionally, economists have warned that the high levels of government debt would cause problems for the US economy as private investment is crowded out by public debt.
But recently, progressive lawmakers, such as Rep. Alexandria Ocasio-Cortez, and some economists have started to latch on to modern monetary theory (MMT), an idea that posits the nominal amount of debt the US holds is not in and of itself an issue.
Rather, MMT adherents say that government spending and debt accumulation is constrained by tangible assets. So if public indebtedness climbs with no effect on inflation, which seems to be the current case given the tame inflation levels in the US, the debt load is not posing a substantial threat to the economy.