The United States has just set a new record for its national debt, reaching a staggering $34.667 trillion. Recent data from the Treasury Department’s Debt to the Penny system indicates this milestone was hit on May 31st. This represents a $677 billion increase from the beginning of 2024, when the national debt was at $33.990 trillion.

This unprecedented level of debt comes as the Congressional Budget Office (CBO) issues a warning about the impact of the nation’s growing debt on American incomes. According to the CBO, if the current trajectory of debt continues, income growth could decrease by 12% over the next three decades and 13% annually by Fiscal Year (FY) 2049. If the debt continues to rise rapidly, income growth could be reduced by 33% over the next three decades and 42% annually by FY 2049. This could lead to a projected income decrease of about $14,500 per person in FY 2054.

The CBO attributes this reduction in household income to the economic theory of “crowding out,” which explains how high debt and deficits can impede economic growth on both a national and individual level. The CBO warns that high debt and deficits pose significant risks to the economy and the budget, hindering economic growth by crowding out investments, raising interest rates, straining the federal budget with increased interest payments, creating geopolitical challenges and risks, complicating responses to emergencies, burdening future generations, and heightening the risk of a fiscal crisis.

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