Concerns about America’s growing debt problem have been voiced by major business leaders and economists. JPMorgan CEO Jamie Dimon and Bridgewater hedge fund founder Ray Dalio both expressed worry about the country’s deficit spending and its potential consequences. Economist Glenn Hubbard highlighted the impact of interest payments on the national debt, which have increased significantly in recent years. The current situation is attributed to a combination of Trump-era tax cuts, Covid-era stimulus programs, and spending under President Joe Biden’s administration.
The national debt has exploded in recent years, with the United States government spending more than it is bringing in. The deficit for the current fiscal year has already accumulated to over $855 billion, contributing to the $34.6 trillion cumulative debt load. The problem is exacerbated by the fact that the US is running a deficit equivalent to nearly 7% of GDP, even as the economy is performing at full employment. This unsustainable scenario could lead to even larger deficits in the future, especially in the event of a recession that requires further stimulus spending.
As deficits grow, the federal government is forced to issue more Treasury securities, increasing yields to attract investors. This, in turn, raises borrowing costs across financial markets, hindering economic growth. The IMF has warned that the high level of US government debt could drive up borrowing costs globally and undermine financial stability. Interest payments on the growing debt are also a concern, with current daily payments of $2.4 billion expected to double within the next decade.
Despite concerns from business leaders, economists, and watchdog organizations, addressing the debt issue has not been a major focus for government officials. The issue is largely neglected in current political campaigns, with a reluctance to discuss tax increases or reduced spending. If left unaddressed, the 10-year US Treasury yield could potentially reach 5.5%, significantly impacting borrowing costs. The lack of action on this issue raises concerns about the country’s financial stability and future economic growth.
Trump Media & Technology Group, led by former President Donald Trump, reported significant losses in the first quarter of the year. The company cited non-cash expenses and one-time payments related to its merger as the primary reasons for the losses. The company generated minimal revenue, raising questions about its multi-billion dollar valuation and future prospects. Despite the losses, Trump Media expressed confidence in its long-term product development and advertising business, aiming to boost results with new products like streaming.
Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg announced his intention to step down following a report detailing pervasive sexual harassment, discrimination, and bullying within the agency. The report found a problematic workplace culture, prompting calls for new leadership at the FDIC. Gruenberg, who has served as chair for nearly 10 of the past 13 years, faced criticism for his behavior towards subordinates. The investigation highlighted challenges in establishing trust and confidence in leading meaningful culture change within the organization.
