The rise in U.S. federal government debt is having significant implications for financial markets, leading to higher interest rates, slower growth and long-term economic instability, RSM US Chief Economist Joe Brusuelas writes in the January issue of The Real Economy.
The United States is borrowing roughly $7 billion per day to finance its operations, with the deficit heading toward $2 trillion this fiscal year, according to the Committee for a Responsible Federal Budget. And it is only going to increase as expansionary fiscal policies take effect in the new year, Brusuelas notes. In addition, even with investors willing to finance the debt, the U.S. primary budget deficit, excluding interest, has reached 3.78% of gross domestic product.
Furthermore, because the American dollar is the global reserve currency, the price of money in global markets will be affected by the trajectory of U.S. borrowing, which as it increases, he adds, will raise financing costs for American households and businesses.
