Donald Trump is jubilant after his “big beautiful budget bill” passed the US Congress this week. But it has also raised an old question: how long can the US afford to carry this huge debt burden? Trump’s tax-cut budget bill is estimated to add at least $3 trillion to the US debt burden.The country’s total public debt currently stands at around $37 trillion, and there is no shortage of criticism about it.Even Elon Musk, a former close ally of Trump, called it a ‘disgusting and perverse’ plan.Investors around the world are questioning the limits of their patience in lending to the United States. This doubt is reflected in the falling value of the dollar and the rising interest rates on US government debt. Since the beginning of this year, the dollar has fallen by 10 percent against the British pound and 15 percent against the euro. The United States is repeatedly having to borrow money to cover the huge gap between its income and spending.And against this debt, the gap between long-term and short-term interest rates has also widened, which is known in economics as ‘yield curve steepening.’ This is raising doubts about the United States’ ability to repay its debt in the future.This is even more worrying because the US has been much slower to cut interest rates than the European Union and the UK. Normally, this would strengthen the dollar, as keeping dollars in the bank earns higher interest rates, but the reality is different.Ray Dalio, founder of the world’s largest hedge fund, said the United States is at a critical juncture. If the current trend continues, the country will soon spend $10 trillion a year on debt and interest payments. “If action is not taken now, there will come a point where this debt will no longer be manageable and a terrible financial disaster will occur,” he warned.Ray Dalio has outlined three possible ‘horrific outcomes’: massive cuts to government spending, or massive tax increases—or both.Central banks printing money and lending to governments—as was seen during the 2008 financial crisis. But this increases inflation and income inequality. Outright debt default—if the United States defaults on its government debt, the global financial system would suffer a severe blow. The likelihood of such a catastrophe is not very high at the moment. But the reasons for this are not reassuring. The reality is that there are very few alternatives to the dollar.Renowned economist Mohamed El-Erian told the BBC, “The world is now trying to devalue the dollar. That’s why the price of gold, the demand for the euro and the pound has increased. But the world has not yet created an alternative to the dollar. It is still the cleanest ‘dirty clothes’ that everyone is forced to wear.”Nevertheless, high-level discussions are now underway about the future of the US dollar and government bonds. The Governor of the Bank of England said, “The amount of American debt and the position of the dollar are one of the main concerns of (US Treasury Secretary) Besant.” This huge amount of debt is unimaginable. If someone were to deposit a million dollars a day, it would take a hundred thousand years to accumulate this amount. However, it is better to judge the matter by the ratio of debt to gross national income of a country.The US has an annual income of about $25 trillion. So while the country’s debt burden is high, it is still lower than that of Japan or Italy. Moreover, the US economy is still the most innovative and growing in the world—this strength is in its favor.
USA Hits $37 Trillion Debt
