Photo taken on Sept. 18, 2019 shows US dollar banknotes in Washington D.C., the United States. US Federal Reserve on Wednesday lowered interest rates by 25 basis points amid growing risks and uncertainties stemming from trade tensions and a global economic slowdown, following a rate cut in July that was its first in more a decade. (Photo: Xinhua)

US stocks kicked off the New Year by reaching fresh record highs, but that doesn't obscure the urgency of America's debt problem or the threat to its economy. Compared with what some US media have been saying about China's debt problem, America's debt burden is the real red flag that can no longer be ignored.

In 2019, global corporate defaults stood at 117, up 43 percent from the previous year, according to S&P Global Rating. Of the defaulting issuers, 77 are based in the US, accounting for 66 percent.

The concentrated debt defaults may be just the tip of the iceberg when it comes to the massive debt burden facing the US. According to data released by the US Treasury Department on November 1, the federal government's outstanding public debt surpassed $23 trillion for the first time in history. 

If you add in state and local debt, corporate debt, home mortgages, credit cards, student loans and other debt, then the total US debt is about 330 percent of GDP, statistics from the Institute for International Finance showed.

What's more worrying is that debt growth has far exceeded GDP growth in the US. America's economy in 2019 is expected to have expanded by around 2 percent, or about $400 billion based on its $20 trillion economic scale, which is apparently far less than the more than $1 trillion increase in government debt alone.

Moreover, the rapidly growing fiscal deficit is another looming danger to the US economy. The US government's budget deficit widened to $984 billion in fiscal year 2019, up 26 percent from 2018 and on track to reach the $1 trillion mark, according to the Treasury. The deficit has almost doubled under US President Donald Trump's tenure compared with the $585 billion level as of the end of former president Barack Obama's second term. 

Trump said in 2016 that he would completely eliminate the national debt within eight years, but this has turned out to be empty talk as the US has been moving in the opposite direction.

As a result, the Federal Reserve had its hands tied due to the heavy financial burden facing the economy. With the growing US debt level, it has become increasingly difficult for the Fed to pursue its dual mandates of steady inflation and maximum employment through monetary policy.

Although the US doesn't need to pay back its debt immediately, when debt grows faster than the economy, it is unsustainable. Given the US' massive debt scale, even the interest payments have become staggeringly high. According to the Treasury Department, interest on US public debt is expected to rise to some $591 billion in the 2019 fiscal year, marking a record high. The Treasury Presentation to the Treasury Borrowing Advisory Committee even forecast that starting in 2024, all US debt issuance will be used to fund the net interest expense, which will be anywhere between $700 billion and $1.2 trillion or more.

The US debt is like an inflating balloon, and everyone knows that one cannot keep blowing it up forever. It's on the verge of getting out of control. The US needs to pay more attention to its debt or a crisis will break out sooner or later, inflicting huge damage on the world economy.