Over two months into Joe Biden‘s presidency, the national debt has grown to about $28.1 trillion, a record high, according to Treasury Department data as of April 6.
The public debt outstanding comprises both public debt and intragovernmental holdings. Over two-thirds of the whole debt is held from the public. The national debt was 28 trillion on March 1.
Also in March, the Congressional Budget Office (CBO) reported that the debt-to-GDP ratio is projected to increase to 102 percent by the end of 2021. By the end of 2020, the ratio had risen over 100 percent. This ratio compares a country’s debt to its entire economic output for the year, as measured by gross national product. The ratio indicates how powerful a nation’s market is and how probable it is to repay its debts.
The CBO also forecasts the federal budget deficit will reach $2.3 trillion in 2021. At 10.3 percentage of the GDP, the shortage 2021 are the second biggest since 1945. Before the pandemic, the fiscal year 2020 deficit was estimated to be $1.1 trillion.
The CBO also said the shortage has widened significantly as a result of the economic disruption caused by the coronavirus pandemic as well as the national legislation enacted in reaction. Last March, Congress passed a landmark $1.9 trillion economic relief invoice.
As COVID-19 vaccinations decrease the spread of the virus and states facilitate restrictions to start up their economies, the CBO expects real GDP, that is adjusted for inflation, to grow by 3.7 percent in 2021.
In a testimony before a Senate panel in the end of March, Treasury Secretary Janet Yellen stated she believes the U.S. is able to spend trillions in projects intended to boost productivity, even with the federal debt exceeding historic highs, according to The Hill.
Yellen previously expressed concern in 2017 as soon as the debt-to-GDP ratio reached about 75 percent. According to the World Bank, when the debt-to-GDP ratio exceeds 77 percentage, economic growth slows. Now, as that ratio has increased, the country has more room to spend, Yellen said.
“My views on the amount of fiscal space that the United States [has], I would say, have changed somewhat since 2017,” Yellen said. “Interest payments on that debt relative to GDP have not gone up at all, and so I think that’s a more meaningful metric of the burden of the debt on society and on the federal finances.”