What Is the Cause of U.S.’s Debt?

TEHRAN (Iran News) As of August 2024, the current volume of the debt exceeds $35 trillion (i.e., more than $35,000,000,000,000!).

Importantly, this figure is greater than the United States’ annual Gross Domestic Product (GDP).

To put it more clearly: Debt-to-GDP Ratio ≈ 125%.

So, I have to explain why huge amount of debt has been accumulated

U.S. governments spend more each year than they collect in revenues (mainly taxes).

Therefore, to fill the gap between spending and income, they issue bonds (i.e., borrow from the public, banks, or countries like China and Japan, etc.).

The factors contributing to the increase in this debt can be identified as follows:

Reduction in tax revenues and legal tax exemptions or cuts (like the 2017 Tax Cuts and Jobs Act);    Increased spending on the military, healthcare programs (Medicare, Medicaid), and Social Security;        Unexpected crises, such as wars or the COVID-19 pandemic, which came with multi-trillion-dollar relief packages; and high interest payments.

In 2024 alone, the government is paying over $1 trillion just in interest on the debt — the largest budget item after defense and healthcare!

Vulnerability during crises caused by unexpected events therefore the government’s ability to respond to recessions or wars is reduced.

It should be noted that today’s youth and future generations will bear the burden of repaying or managing this debt.

Since the debt is denominated in U.S. dollars (the world’s reserve currency), the U.S. can issue more dollars to manage its debt. However, this inevitably carries the risk of inflation.

The global overconfidence in U.S. Treasury securities allows the government to borrow money at low interest rates.

Public Debt:

This is the part of the debt held by foreign investors, banks, or ordinary citizens.

If U.S. hegemonic power collapses, this debt becomes payable, and more importantly:

Intragovernmental Debt:

This is the debt the government owes to its own institutions (such as the Social Security Trust Fund).

Failure to update or replenish these internal funds can lead to bankruptcy.

A figure that has always remained hidden from the global public eye is the amount of currency printed by the Federal Reserve that is circulating outside of the U.S..

If political crises escalate, or the value and credibility of BRICS increase, this could pose a serious challenge.

In summary, the U.S.’s debt is a structural result of: Tax cuts, Rising social and military spending,    Recurring crises, and the unchecked printing of unbacked currency.

While some economists view this debt as a “tool for growth,” its unchecked accumulation can lead to financial instability and potentially trigger a domino effect — causing institution-by-institution collapse within the United States.