The Debt Crisis Could Trigger a Recession in US. Here is How | Vantage on Firstpost

US President Joe Biden has said progress is being made to end the debt ceiling crisis. Democrats and Republicans are considering an agreement that could raise the US debt ceiling for two years. But experts are worried. They fear a deal could trigger a recession in the US. Catch the full story on Vantage

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The United States has been experiencing a debt crisis for quite some time now. The level of government debt, corporate debt, and household debt is at an all-time high, raising concerns over the impact it could have on the economy. The debt crisis could potentially trigger a recession in the US, affecting millions of Americans.

The US economy has been expanding for more than a decade, and it is among the longest economic expansions in the country’s history. However, the growth is not sustainable, and there are several indications that the economy could be heading towards a recession. The debt crisis is one of those indications that could lead to a recession.

Government Debt

The government debt in the US is a major concern for the country’s economy. The government has been borrowing heavily to fund its programs and initiatives, increasing the national debt to more than $26 trillion. The rising debt levels have put pressure on the government to increase taxes or cut spending to control the debt. However, both options could have a negative impact on the economy.

Raising taxes could slow down consumer spending and lead to a decline in economic growth. Cutting government spending could lead to job losses, negatively affecting the working population. Hence, reducing the national debt becomes a difficult task for policymakers, and this could trigger a recession if not managed effectively.

Corporate Debt

Another area of concern is the corporate debt. The low-interest rate environment in the US has led to companies borrowing heavily, increasing their debt levels. The pandemic has also increased companies’ dependence on debt to fund their operations. The federal government’s response to the pandemic has led to the corporate debt reaching an all-time high of $10 trillion. The increase in corporate debt puts a strain on businesses, making it difficult for them to invest and expand. Cutting back on investments could lead to job losses and further hinder economic growth.

Household Debt

The US economy is heavily reliant on consumer spending. However, the high levels of household debt have made it difficult for consumers to spend and drive the economy. The typical household debt in the US reached $145,000 in 2021, including credit card debt, student loans, and mortgages. The high debt levels are making it difficult for consumers to save money or invest in their future. This could lead to a decline in consumer spending, which could ultimately lead to a recession.

In conclusion, the debt crisis in the US could potentially trigger a recession and negatively impact millions of Americans. The high levels of government, corporate, and household debt are putting a strain on the economy and limiting growth. Policymakers need to address these concerns with smart policies and initiatives that reduce debt levels and spur economic growth. The US economy needs sustainable growth that benefits all Americans; otherwise, we may find ourselves in another economic crisis.