America’s Robust Economic Recovery: A Double-Edged Sword? Understanding the Risks and Implications of Deficit Spending

The United States has been leading the way in economic recovery after the COVID-19 pandemic, thanks to its deficit spending policies. This has been recognized by the International Monetary Fund (IMF), which has commended the country for driving global economic growth. However, the IMF also expressed concerns about the increasing national debt and associated financial risks in both the short and long term.

Despite strong post-pandemic performance and surpassing expectations in terms of Gross Domestic Product (GDP) growth, the U.S. national debt has reached $34 trillion and continues to rise. Government debt in the U.S. surged during the pandemic as relief checks and other stimulus measures were implemented under both Donald Trump and Joe Biden’s administrations. President Biden has further increased spending on infrastructure, green energy, and social programs since 2021. While there is bipartisan agreement on the need to address deficits, there is disagreement on how to do so, resulting in a compromise that allows debt to accumulate.

The approach of spending without appropriate revenue generation poses financial threats to the global economy, particularly if interest rates remain high. The IMF has warned that adjustments will be necessary to address these concerns in the near future, emphasizing that fiscal sustainability must be achieved through a combination of revenue generation and structural reforms.