NEW YORK, January 19. /TASS/. Raising the ceiling of the United States national debt will affect the long-term growth of the country's economy and its ability to finance government programs in the future. Kyle Shostak, director of the Navigator Principal Investors company voiced this opinion in an interview with TASS.
Earlier, the US Treasury notified Congress that the country would reach its national debt ceiling on January 19.
"Raising the limit of public debt directly affects the prospects for the long-term growth of the American economy. As the public debt grows at a tremendous pace, investments in the public sector will inevitably decrease, the government will be forced to allocate significantly more funds to pay interest on the debt," the investor said.
"It is this item of spending that becomes the main one in the federal budget, far ahead of everything that could be allocated for scientific research, civil infrastructure and education," he added.
Shostak noted that "the United States is a deeply debt-ridden economy with a debt-to-GDP ratio of over 100% since 2014," yet "it is unlikely that anyone in the political establishment, even militant Republicans determined to deal with exorbitant government spending, decide on drastic political measures and go against the established tradition" of raising the debt ceiling.
If the ceiling of the public debt is exceeded, the Treasury will have to resort to extraordinary measures - freezing funding for a number of pension funds for civil servants, as well as stopping the reinvestment of the State Securities Fund, the expert said. If Congress delays approving an increase in the national debt ceiling until the summer, this could lead to a partial loss of the sovereign credit rating.
"Civil servants will also suffer, as they will miss the accumulated and reinvested pension. Infrastructure construction programs will stall, the budgets of many federal ministries and agencies will be temporarily frozen. Purchases of sovereign securities by foreign institutional investors will be suspended, which will take a wait-and-see attitude until the situation is clarified," Shostak added.
Raising the US debt ceiling is "a situation in which everyone is to blame, but the search for the culprit is impossible, since it is politically undesirable," the investor concluded.
US Treasury Secretary Janet Yellen sent a letter to Speaker of the House of Representatives Kevin McCarthy on Friday, saying that the United States will reach the national debt ceiling on January 19. In this regard, she called on legislators to take prompt measures to increase it.
At the end of 2021, US President Joe Biden signed a law that raised the country's debt ceiling by $2.5 trillion to $31.4 trillion. Thus, a potential default was averted. As Yellen said at the time, if the law had not been approved, there could have been a shortage of funds needed to finance the work of the federal government. Now the public debt of the United States exceeds $31.3 trillion, which is a record high figure.