In August, global rating agency Fitch reduced America’s rating from AAA to AA+. The agency did this because of the country’s increasing debt. America’s gross national debt is increasing very rapidly. It has increased by one trillion dollars in the last three months alone. In the first 11 months of the financial year, the budget deficit, i.e. the difference between government expenditure and income, has reached 1.5 trillion dollars. This is 61 percent more than last year. The recent increase in interest rates has already made it very expensive for the government to repay the loan. Also, the government has no plan to repay the loan, which may make the situation worse.
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Fear of shutdown
The fiscal year ends on September 30 and Parliament must approve the 2024 budget by October 1 to avoid a shutdown. But according to a CNN report, none of the 12 bills required to fund the government have been approved so far. Therefore, the plan is not likely to be passed by the deadline. The threat of government shutdown is looming in America at a time when America is facing many challenges on the economic front. Inflation and interest rates are at their peak in the country, losses have become rampant, auto industry employees are on strike and fuel prices are skyrocketing. Due to this, the possibility of recession in the country has increased.
Due to the government shutdown, services of most government agencies will be closed and all non-essential government employees will have to go on unpaid leave. According to EY analysts, there are about 800,000 non-emergency federal workers in the country whose average salary is $95,000. This will cause a loss of six billion dollars every week to the American economy and there may be a decline of 0.1 percentage point in GDP growth in the fourth quarter. There have been many shutdowns in America’s history. There was also a government shutdown in the country in late 2018 and early 2019.
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How much interest will have to be paid
Michael Peterson, CEO of the Peter G. Peterson Foundation, a fiscal responsibility group, said, ‘Inflation and interest rates have increased significantly recently. This can lead to a sudden and rapid increase in the cost of debt. More than $10 trillion interest will have to be paid in the next decade. This will spoil the future of our children and the next generation. Interest rates in America are at a 22-year high and the housing market is headed for its worst sales slowdown since 2011. Fuel prices in the country are at the highest level in a year.