by Rod Williams, Aug. 26, 2026 - For decades, people, mostly Republicans, have expressed concern about the growing national debt. They were right to be concerned, but since the disasters never came true, people stopped being alarmed. I think it was the "Chicken Little," or the "boy who cried wolf" effect.
So, why is this time more concerning than all of the other times people expressed concern about the national debt? Because, as predicted, out-of-control debt increases at a faster and faster pace, and now we are seeing the beginning of the predicted effects.
Consider a household that has a budget shortage one month. Maybe someone did not get the overtime they expected, or they purchased something they didn't have the cash to pay for. At first, the additional credit card bill is small. But then, in addition to all their other bills, they have to pay that small credit card bill every month, and any month when expenses exceed income, they just put more of their bills on the credit card. Also, it gets easier and easier to forget about delayed gratification, and the household buys things when they need or want them, instead of waiting. Soon, they have no choice but to put more daily expenses on the credit card because the credit card bill is now as large as their car payment or even their house payment.
In the case of the household, when the borrower reaches the credit card limit and without the ability to borrow more, the borrower has to file for bankruptcy. Of course, the US is not a household, and a sovereign nation has more tools in its toolbox than a household. The US is not facing bankruptcy yet, nor are we going to default on our debt in the immediate future. However, our debt causes us to put more debt on the credit card each month.
The "
Penn Wharton Budget Model" is a highly respected program associated with the University of Pennsylvania and provides nonpartisan, research-based estimates and analysis on the fiscal impact of public policy. It predicts that on the current trajectory, the government will have no choice but to default on its debt within 20 years.
For fiscal year 2025, the U.S. federal government ran a deficit of about $1.78 trillion. It spent $7.01 trillion and collected $5.23 trillion in revenue. The US will have an even bigger deficit this year. The U.S. government will pay $1 trillion in interest payments to current debt holders. And like the household that reaches the point where the credit card bill is larger than the car payment, the US interest on the debt exceeds the Defense budget or any other departmental budgets. Interest payments are now the third-largest spending item in the budget behind Social Security and Medicare. This is not sustainable.
Also, we are at a point where the interest we pay on the debt is variable and beyond our control. It is such a large part of the budget that it could rise rapidly even if, somehow, we balanced a budget. As a recent article in
National Review pointed out;
An enormous baseline debt also makes interest rates the most dangerous variable on future spending. Although projections assume that rates remain moderate forever, a single percentage-point increase would be the fiscal equivalent of adding a second military. And, as debt accumulates and financial markets grow wary, higher interest rates become all the more likely.
A concerning trend is that other nations are dumping US debt. We have been able to ignore our large debt for so long because we were the world's reserve currency. Other countries wanted to buy our debt. We remain the world's reserve currency, but there are troubling signs that this is changing. Other countries' currencies are becoming attractive. Japan and China have been dumping dollars, and other nations are diversifying from holding almost all dollars in their reserve portfolio to holding dollars, other currencies, and gold.
Another disturbing trend is that the US is issuing more short-term debt and buying up long-term debt. Doubts are growing about the US economic stability, and holders of our debt are reluctant to buy long-term debt. The yield the US pays on bonds is easing up.
In addition to people feeling less secure holding U.S. debt than before, the U.S. is competing with technology companies for money. For example, Meta’s investment‑grade bonds currently offer yields well above the U.S. Treasury 30-year yields. Both are rated in the high‑grade category by credit rating agencies, with the US bonds having only a modest edge. To compete for investors, we have to raise the yield on US debt instruments. This has an impact on the cost of the American consumer. Things like credit card rates, car loans, home loans and student loans are all tied to the interest rates paid on bonds.
One way of looking at the size of the debt is to look at the debt as a percent of GDP. Gross Domestic Product, of course, is the value of all economic activity in a country in a given year. The GDP-to-debt ratio is now, 130.6%. That is the highest it has ever been. Ten years ago, it was 99.5%.
Some, will say we have nothing to worry about, and we could fix our problem if we withdrew from the world and reduced our military spending, or if we heavily tax the trillionaires or made the rich "pay their fair share," or if we stopped illegal immigration or if we got rid of waste, fraud, and abuse. None of those positions address the issue. These are simply solutions that do not solve the problem. The size of the military and how progressive the income tax should are debatable points. However, they do not solve the problem of an out-of-control debt spiral. A massive reduction in our defense spending could lead to costly wars, and confiscatory taxation could lead to less economic growth. Illegal immigration is an insignificant contributor to the budget woes, and I am not sure it even adds to the national debt. Some studies show that the illegal immigration we have experienced has actually been an economic plus. We should always strive to reduce waste, fraud, and abuse, but doing so won't solve the problem of deficits and debt.
People who offer simple, easy solutions are living in la-la land. The problem is larger than they think, and when the government takes any single action, one cannot hold the other variables constant.
I do not think there is nothing we can do, but it will not be easy. I do not think any president or Congress can pay off the debt in four years or eight years. I don't want to hear a candidate promise that. Maybe in 1981, when the debt to GDP was only 31.1% that would have been believable, or maybe as late as 2001 when it was 54.5%, but not now. What we can do is stop cutting taxes and increasing spending. We need to stop adding to the problem.
It is not that some strategic tax policy, including tax cuts, cannot sometimes spur economic growth, and not that new spending may occasionally be needed to fix certain problems, but basically, we need an austerity budget. Unfortunately, Democrats are talking about more large social spending programs, such as Medicare for all and national childcare and free college for all. We simply cannot afford more major spending programs, but almost every Democrat running for office is pledging support for Medicare for all and some of the other costly programs.
We need leaders who will tell the American people that we are facing a crisis and are going to have to feel some pain for a while. While I don't think there is any quick fix, we can bend the curve and avoid a disaster, but not if we continue with business as usual and continue to use tax cuts and more spending as the bait to get elected.
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