US debt nears $38.5T as new year begins

US federal debt is approaching the record $38.5 trillion mark

US federal debt reached $38.42 trillion, approaching the record $38.5 trillion mark at the start of the new year, highlighting the rapid pace of borrowing and rising interest costs.

Treasury Secretary Janet Yellen warned over the weekend at an event hosted by the American Economic Association that US debt is on a steep upward trajectory, potentially reaching 150% of GDP over the next three decades.

A panel of senior economists said the long-term risks posed by growing federal debt represent a major challenge for the US economy.

These risks include a scenario in which the size of the Federal Reserve’s balance sheet forces interest rates to remain low to reduce debt-servicing costs, rather than to contain inflation.

The Congressional Budget Office projects the federal deficit will reach $1.9 trillion this year, with total debt rising to roughly 100% of GDP, and climbing to 118% over the next decade.