US is on unsustainable government borrowing trajectory. “I am very concerned about our deficits. We are on a path that is unsustainable,”, the head of the Federal Reserve System (FRS, the central bank) of the United States, Jerome Powell, told the Economic Club of Washington. “This does not mean that the level of debt we have cannot be sustained. That's not the situation,”, Powell said.
„However, the path we are on – we have large deficits at a time of full employment and healthy economic growth cannot be sustained over time. We really need to start working on that“, the Fed chairman noted.
From his perspective, the US Congress is beginning to understand this. "I think there is a growing sense that it is time to do something. And that will require bipartisan action," Powell stressed.
At the end of June, the International Monetary Fund (IMF), in a report on the results of the annual review of the US economy, based on Article 4 of its charter, reported that in the medium term, the budget deficit and the US debt to GDP will remain significantly higher than the forecasts that existed before the pandemic.
Under current policies, public debt is expected to grow steadily and exceed 140% of GDP by 2032. Likewise, the government budget deficit is expected to remain around 2.5% of GDP, which is more higher than the level projected during the Article 4 consultation in 2019. According to the fund, "deficits and debt this high pose an increasing risk to the US and global economies". The IMF highlights the need to "urgently remove" this problem.