With an amount of more than 34,600 billion dollars (31,800 billion euros), or more than 120% of American GDP according to provisional figures from the IMF (i.e. more than France at 110%), the American debt begins to worry economic players. And for good reason: Covid period aside, this is one of the highest ratios since the Second World War. So much so that last February, Jerome Powell, the head of the American Federal Reserve, sounded the alarm: “In the long term, the United States finds itself on an unsustainable fiscal path warns Powell*, the debt is growing faster than the economy”* he added in an interview with CBS.
Public accounts deteriorated during Covid with the drop in budgetary and tax revenues, but above all the increase in social spending through programs such as the Paycheck Protection Program or the American Rescue Plan. Except that since then, no improvement has been seen, on the contrary: forecasts suggest an increase in the debt and the deficit. According to the IMF, the American public debt could reach 138% of GDP in 2028. As for the public deficit of the American state, according to the CBO (the American budget office, a sort of Court of Auditors in the United States), it does not should not fall below 5.5% for the next ten years, where the European Union is very attached to its 3% rule. The United States is therefore continuing – rather calmly – its expansionary budgetary policy.
The United States, the bank of the world
Calmly, because unlike Europe where the urgency is to reduce the debt and the deficit of the States, the United States can afford to continue spending for a very simple reason: the United States is the bank of the world ! The dollar is still the preferred value on the markets, where American debt securities, the famous “T-Bonds”, are still highly sought after. The United States therefore has no problem financing its debt: They enjoy what is called “the exorbitant privilege” of the dollar – an expression used in 1964 by the French Minister of the Economy at the time, a certain Valery Giscard d’Estaing.
In short, as enormous as it may be, the American public debt is considered safe and therefore does not worry economic players, so much so that neither of the two presidential candidates has planned anything in their program to reduce it, quite the contrary. According to the Committee for a Responsible Federal Budget, an independent organization, Kamala Harris’ program would increase the debt by $3.5 trillion to reach 133% of GDP in 2035. For Donald Trump, the forecast reaches $7.5 trillion. additional, or 142% of GDP.
So can this continue like this forever? In reality, we do not know when the American debt will actually be unsustainable. The problem is that going into debt is becoming more and more expensive for the United States: the amount devoted to paying interest on the debt is becoming a significant item of public expenditure, to the point, for example, of exceeding in the federal budget, that of education. So barring a specific event, most economists agree that this debt is on track to last for another ten years.
