U.S. national debt surpasses $31 trillion

Yahoo Finance columnist Rick Newman details how the U.S. national debt has surpassed $31 trillion for the first time ever and what it could mean for the economy.

Video Transcript

SEANA SMITH: Borrowing keeps surging. The national debt now tops $31 trillion for the first time ever. Yahoo Finance's Rick Newman joins us now with the details. Rick, of course, there has been this long debate whether or not this matters, how much attention we should pay to this. What do you think?

RICK NEWMAN: Eh, it's only $31 trillion.

SEANA SMITH: But it's serious. There are severe implications here-- potential.

RICK NEWMAN: So there have been analysts saying, we're going to have a debt crisis like $10 trillion ago. And it obviously hasn't happened yet. And the way it would happen, if it ever does happen, I mean, look what just happened in the UK. I mean, they cut taxes. The market said we don't like this fiscal situation at all.

Bonds shot up. People wanted to get out of the UK, and the government had to come back and say, hey, we take it back. We're not going to do that anymore. If there ever is a debt crisis because the US government is borrowing too much, US interest rates will rise. There will be some kind of turmoil in financial markets, and the US government will have to correct very quickly. It just hasn't happened.

I looked up-- so on that $31 trillion in debt, the average interest rate is just 1.6% on all that debt. That's partly because some of it's short-term, where the rates are low, but a lot of that debt has been issued when we've had historically low interest rates. So that borrowing has been a good deal for the United States. Not so much if interest rates go up more and stay high because it's going to become a lot more expensive just to pay the interest on that debt.

RACHELLE AKUFFO: And Rick, I do understand what you mean. Sort of, once you sort of hear $10 trillion, $20 trillion, people's eyes start to glaze over. Like, OK, but how is that actually affecting me today? What are some of the ways that, as you're having sort of conversations around the kitchen table, that people would actually see it affecting their everyday life?

RICK NEWMAN: I mean, I'm going to-- I might actually challenge the premise that people are having conversations around the kitchen table about this. I mean, people kind of have it in mind that the United States has too much debt, but nothing bad keeps happening. So I'm not-- I just feel like this is probably faded as a kitchen table issue, especially since now that inflation is such a big deal.

I mean, there are these polls over time. What's the biggest factor in the economy that you're worried about, they ask voters. It used to be the debt, sometimes, it comes in the top five. I don't think people care as much anymore.

DAVE BRIGGS: Well, Republican politicians used to use this a lot and used to care about it a lot. And then they started outspending Democratic presidents, and then we're all in on it now. So then, I think that's what took it off the kitchen table. But the rising interest rate environment we're in now, doesn't that have considerable impact on the interest we're paying?

RICK NEWMAN: It certainly would over time. So interest payments on the debt in the last 12 months were something like $680 billion. That is almost as much as we spend on the Pentagon. That's a lot of money. That was about 12% of all federal expenditures during the last year. So, yeah, it's a lot.

But as long as the markets-- I mean, people just keep lending Uncle Sam money. I mean, there's a deep appetite for Treasury securities. I mean, we're seeing it now, as all this money is coming into the United States from overseas to take advantage of higher interest rates here. Every time there's some little problem in financial markets, everybody-- the rush to security always goes into treasuries. There's a huge demand for US Treasury debt.

And if-- let's say the US government did start to issue less debt, I think financial markets would have to figure out how to adapt to that because there is not that much of an alternative to the safety still of US treasuries.

SEANA SMITH: And it also hasn't been a priority of recent administrations. You don't hear much when-- leading up to the midterms. You didn't hear a lot about it leading up to the last president, Joe Biden.

RICK NEWMAN: Well, you know what? 'Cause, you know, when you did hear about it for about a nanosecond was the Inflation Reduction Act. Supposedly, some of these very small tax increases, business tax increases in that were supposed to reduce deficits by $300 billion. So that's $300 billion divided by $31 trillion. It barely even registers.

But then, the next thing Biden did a few weeks later was forgive all this college debt, which is going to offset that deficit savings, and then add more to the debt. And we aren't even really sure how much that's going to add. And I don't-- I'm sorry, I didn't see a lot of people picketing the White House saying--

SEANA SMITH: No, not at all.

RICK NEWMAN: --don't add to the debt. Don't add to the debt. The fact is Republicans add to the debt by cutting taxes and implementing their own spending. Democrats add to the debt by new programs, clean energy subsidies, and stuff like that. Everybody loves it.

DAVE BRIGGS: And we keep kicking the can on down the road. Senior columnist Rick Newman, good to see you, sir.

RICK NEWMAN: Bye, guys.

DAVE BRIGGS: Thank you.