US Debt Tops $31 Trillion for First Time

Happy Tuesday! The Nobel Prize in Physics was awarded to three scientists who advanced our understanding of quantum mechanics and the concept of "entanglement," or the "spooky" way that particles affect each other’s behavior — what CNN calls "a mind-boggling phenomenon when two particles behave as one and affect each other, even though they can be at a vast distance to one another, on opposite sides of the planet or even the solar system."

In other mind-blowing developments, the national debt just topped $31 trillion — a number so large that it’s hard to comprehend. Here’s what you need to know today.

US Debt Reaches New Milestone, Topping $31 Trillion

The U.S. national debt topped $31 trillion for the first time on Monday, a milestone that comes nine months after it first hit $30 trillion.

The total public debt outstanding is now just over $31.1 trillion, according to data from the Treasury Department. Debt held by the public, which excludes intragovernmental borrowing, stands at roughly $24.3 trillion.

The latest high mark in the nation’s debt burden prompted a fresh round of warning from budget watchdogs, particularly given rising interest rates, which have been driven to levels not seen in years by the Federal Reserve’s efforts to rein in inflation.

The national debt has surged in recent years, driven by trillions of dollars in deficit-financed spending in response to the coronavirus pandemic as well as new spending programs and the 2017 Republican tax cuts.

A decade ago, the debt totaled $16.2 trillion. Five years ago, it was $20.3 trillion.

The Committee for a Responsible Federal Budget, a nonprofit that advocates for deficit reduction, said the Congress and President Joe Biden have signed off on $1.9 trillion in new borrowing this year, and Biden has approved $4.9 trillion in new deficits since taking office.

"Even more troubling than where the debt stands now is where it’s going," Maya MacGuineas, the group’s president, said in a statement. "Our nation faces significant fiscal challenges in the near term. Medicare is only six years from insolvency, and Social Security insolvency is only 12 years away. Yet policymakers have put forth no plan to put either program on strong fiscal footing."

Years of historically low interest rates led many economists and analysts to argue that the increased borrowing was eminently affordable, with some emphasizing that not all deficit spending is the same — and some may be worthwhile given the potential economic or social benefits.

At the same time, budget analysts have long warned that rising rates could dramatically increase the cost of U.S. borrowing, eventually making the government’s interest costs the most expensive item in the federal budget.

Given the rise in interest rates, "[t]he deficit path is almost certainly too high," Jason Furman, a Harvard economist and former chair of the Council of Economic Advisers under President Obama, told The New York Times. "We were sort of at the edge of ‘OK’ before, and we are past ‘OK’ now."

Alan Rappeport and Jim Tankersley of the Times note that Biden and officials in his administration have played up the deficit reduction taking place on their watch and have made clear they would like to enact additional deficit-cutting tax hikes on top earners and large corporations. But Biden officials "also say they are comfortable with the debt and deficit levels in the administration’s forecasts and do not see the nation as anywhere close to a fiscal crisis," Rappeport and Tankersley write. "They say the government’s inflation-adjusted interest costs — their preferred metric for the debt burden — remain historically low as a share of the economy."

Quote of the Day

"There is no truth to that."

– Treasury Secretary Janet Yellen, at an event in Washington D.C. Tuesday, dismissing a recent report in Axios that she would be stepping down from her job following next month’s midterm elections. National Economic Council Director Brian Deese, who was also the subject of speculation that he might leave his job soon, said last week that he has no plans to move on.

Micron to Invest Up to $100 Billion in US Manufacturing, Credits CHIPS Act

Micron Technology announced Tuesday that it plans to spend $20 billion to build a state-of-the-art semiconductor production complex in upstate New York, part of a domestic manufacturing effort that could see the company investing as much as $100 billion in the area over two decades.

At a press conference held at Syracuse University, near the proposed building site in Clay, New York, Micron CEO Sanjay Mehrotra told reporters that the company chose the location for the depth of the local labor pool, the quality of schools in the area, access to clean water – and, not least, the extraordinary financial incentives provided by local, state and federal governments.

In addition to $5.5 billion in state and local tax credits, Boise, Idaho-based Micron expects to claim a share of the $52 billion in incentives made available by the federal government through the CHIPS and Science Act of 2022, which President Biden signed into law last summer to encourage domestic semiconductor production and investment in scientific research and development more broadly.

"There is no doubt that without the CHIPS Act, we would not be here today," Mehrotra said. "The legislation along with favorable tax treatment and partnerships with state governments like New York are key ingredients needed to match the subsidies offered by Asian nations and ‘bring chip-making back to America.’"

The first phase of the project will involve spending $20 billion to build a plant, known as a mega-fab, that will employ 3,000 people once it’s up and running. Site preparation is expected to begin in 2023, with construction starting in 2024 and the factory coming online in 2025.

If the company decides to expand the facility, it could end up building a complex of four factories employing 9,000 people, at a total cost of roughly $100 billion.

The politics of development: The White House celebrated Micron’s announcement, linking it to the president’s legislative efforts. "To those who doubted that America could dominate the industries of the future, I say this – you should never bet against the American people," Biden said in a prepared statement. "Today is another win for America, and another massive new investment in America spurred by my economic plan."

New York Gov. Kathy Hochul also highlighted the announcement. "New York will be home to one of the largest economic development projects in American history," she said on social media.

Senate Majority Leader Chuck Schumer (D-NY), who has advocated for U.S.-based tech manufacturing, with his home state playing a leading role, said that passing the CHIPS Act played a key role in securing the deal. "Had America not done that, I think our economy would have slipped," Schumer said, according to The New York Times. "We’ve led in semiconductor research, but over the years we let the manufacturing slip away. But we’re reversing that now."

In separate comments to The Washington Post, Schumer paid tribute to the "transformational" nature of the deal. "This is our Erie Canal moment. Just as the Erie Canal fueled explosive job growth and prosperity in the 19th century, so will these investments fuel explosive job growth and prosperity in the 21st century."

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