Two days before the announcement of the alleged default, US President Joe Biden signed a law to raise the country's national debt ceiling. This was reported on the evening of June 3 in the press service of the White House.

"The Financial Responsibility Law of 2023 suspends the public debt ceiling until January 1, 2025 and increases the limit from January 2, 2025 to fulfill obligations issued during the suspension period," the report said.

Recall that at the beginning of 2023, the US national debt slightly exceeded the maximum allowable mark of $31.4 trillion. As a result, the government began to run out of money to meet its own obligations, and the country's Ministry of Finance warned of the threat of default.

Against this background, the agency decided to temporarily abandon some budget spending in order to continue to pay the bills and give Congress time to discuss a new debt ceiling. According to the US Treasury, the resource of the measures taken could have been completely exhausted as early as June 5, and then the federal government would have to default.

As Joe Biden noted earlier, such a development would lead to the beginning of a deep recession in the US economy, emptying retirement accounts and increasing the cost of borrowing. At the same time, he said, almost 8 million Americans would lose their jobs, and Washington's reputation in the world would be seriously undermined.

Negotiations on a new debt ceiling lasted several months. Initially, the Biden administration and Democratic politicians insisted on raising the limit without any conditions. Meanwhile, Republicans agreed to change the current cap only in exchange for budget cuts. In the end, the parties were able to find a compromise only on May 28, after which the agreement was sent to Congress for approval.

"This is very good news for the American people. Neither side got everything they originally wanted, but the American people got what they needed. We have prevented an economic crisis, an economic collapse. We are cutting spending and at the same time reducing the (budget. - RT) deficit, "Biden said on June 2.

Although the agreement was supported by a majority of votes in both houses of Congress, a number of US officials strongly opposed its adoption. For example, Republican Rep. Matt Rosendale called the deal a "law on financial irresponsibility," and its approval was "an insult to the American people." At the same time, according to Congressman Dan Bishop, the Democrats have achieved a sharp increase in the national debt and "will not bear any responsibility for it" ahead of the 2024 elections.

The approved deal was also skeptical about the well-known American financier and founder of the world's largest hedge fund Bridgewater Associates, Ray Dalio. According to him, the decision was the best option of all that could be expected, but not enough to solve the economic problems of the United States, for which the country's leadership can "put a deuce".

"The authorities want to solve the debt problem by adding too much appendage to an already excessively large debt ... It won't change much," Dalio wrote on Twitter.

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Debt spiral

The U.S. national debt represents the total debt owed by the federal government to creditors. Washington borrows money to pay for all the necessary expenses that can no longer be covered with budget revenues.

To do this, the country's authorities mainly use special treasury bonds (treasuries). American and foreign investors buy securities issued by the US Treasury and receive a stable income on them, in fact, lending their money to the US economy. These funds are used to pay off the budget deficit.

According to the Federal Reserve Bank of St. Louis, the spending of the American treasury has consistently exceeded the amount of cash receipts over the past 20 years. During the same time, the country's public debt has increased fivefold, today its volume is about 120% of GDP.

Back in 1917, the US authorities first introduced the so-called debt ceiling. We are talking about an artificial restriction, which was originally created to protect the country from excessive growth of borrowing.

At the same time, against the backdrop of constantly growing budget expenditures, the country's leadership periodically has to either raise the limit or completely abandon its use. According to Congress, since World War II, the United States has changed the debt ceiling more than 100 times. Moreover, the discussion of this issue is often accompanied by heated debates, and delaying the process each time pushes the country to default, experts say.

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"Formally, the United States is already in default. In reality, they do not receive as much income as they need for their own existence and development ... (Raising the debt ceiling. - RT) has the form of a huge snowball rolling down the mountain, which is constantly increasing. One day there will come a time when it will no longer be possible to negotiate - and the whole world will understand this. Then the countries will cease to fill this ball and it will simply explode, "Anatoly Aksakov, head of the State Duma Committee on Financial Markets, suggested in an interview with RT.

More expensive than defense and social needs

According to the forecast of the US Congressional Budget Office, taking into account the agreements reached, by the beginning of 2025, the country's national debt may grow from the current $ 31.4 trillion to $ 34.2 trillion. At the same time, in the event of a further increase in the ceiling in 2033, this will be an amount that can exceed $ 52.3 trillion.

"Such dynamics of the debt burden remains a serious problem for the United States. It is likely that in the context of an increase in the debt-to-GDP ratio and an increase in debt service costs, we can expect new fiscal tightening measures, including both budget cuts and an increase in the tax burden, "Mikhail Stepanyan, strategist at Freedom Finance Global, told RT.

It should be noted that in recent years, servicing the US national debt has risen markedly against the background of the changed policy of the US Federal Reserve System (performs the functions of the country's central bank). In 2022, after the introduction of energy sanctions against Russia, fuel prices rose sharply in the United States, and inflation accelerated at a record rate in 40 years. To combat the rise in prices, the Fed began to sharply tighten monetary policy (monetary policy) and in just over ten times raised the interest rate - to 5-5.25%, the highest level since 2007.

Tightening monetary policy is considered one of the main tools in the fight against inflation. As a result of rising rates, the cost of loans for citizens and businesses is rising, economic activity is weakening, which puts pressure on prices. At the same time, due to the actions of the Fed, the cost of servicing the US national debt also increases.

According to congressional estimates, in 2022, Washington's spending on interest payments on public debt increased by 35% and amounted to $476 billion, it was assumed that in 2023 the amount would increase by another third to $663 billion, and in 2033 it would exceed $1.4 trillion.

Moreover, according to Brown University, by 2050, debt service will cost the United States government $6.5 trillion annually. Thus, over the coming decades, interest payments will become the largest item of expenditure of the US budget, according to a study by the Peter Peterson Foundation.

"In the next 30 years, interest payments will amount to about $ 74 trillion, and by 2053 they will go to almost 40% of all federal budget revenues. Interest costs... in 2029, they will exceed the amount of defense spending, in 2044 - on Medicare (health insurance program for the elderly population. - RT), and in 2050 - on social insurance, "the organization calculated.

In addition, as noted in the fund, the need to service public debt will force the US government to cut public investment, which could ensure economic growth in the future. So, by 2053, the US authorities will spend almost three times more money on interest payments than they have ever spent on education, non-defense infrastructure development, research and development combined.

"In the future, the United States will face serious difficulties in the fiscal sphere. The country has significantly increased borrowing to respond to the COVID-19 pandemic, but the structural imbalance between expenditures and revenues that existed before is still large and will continue to grow rapidly. In addition, with the increase in interest rates and the increase in public debt, borrowing in the future will become even more expensive, "the authors of the report added.

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Thus, the approved increase in the debt ceiling once again only postponed the problem, but does not solve its root causes, BitRiver financial analyst Vladislav Antonov said in a conversation with RT. At the same time, according to the expert, there is less and less space for the country's leadership to repeat such maneuvers.

"The growing US national debt will become a serious threat in the future for both the American and the world economy as a whole. However, the bulk of the politicians of the United States are still of little interest in this. Nevertheless, we see that confidence in the United States is already falling, and the share of the dollar in international payments and reserves is steadily declining," Antonov said.

According to the International Monetary Fund, in 2022, the share of the US currency in world reserves decreased from 58.8% to 58.36%, which was the lowest value since 1995. For comparison: back in the early 2000s, the figure exceeded 72%. As State Duma Chairman Vyacheslav Volodin explained earlier, at the moment many countries are beginning to gradually abandon settlements in dollars, since the US national currency "becomes toxic", and its use carries more and more risks.

"All pyramid schemes, as history shows, sooner or later end in failure. But here the situation is special. The US national debt is a global financial pyramid built by Washington to deceive other peoples and countries. It is right for states dependent on the dollar to look for an alternative to it today, thereby reducing the risks for their citizens, "Volodin warned.