Investors Raise the Alarm
The U.S. national debt stands at $36.21 trillion, and it’s climbing fast. A Deutsche Bank poll found that 80 percent of investors believe this trajectory is unsustainable, a concern mirrored by Moody’s recent decision to lower the U.S. credit rating from Aaa to Aa1. For everyday Americans, these warnings signal potential trouble ahead, from higher taxes to strained public services.
The numbers paint a stark picture. The Congressional Budget Office predicts federal debt will jump from 100 percent of GDP in 2025 to 118 percent by 2035, with deficits averaging over 6 percent of GDP annually. These figures have ignited debates about how to avoid a fiscal crisis that could reshape the economy.
What makes this issue so pressing? It’s not just about abstract debt figures—it’s about the real-world impact. Rising debt could limit the government’s ability to fund schools, roads, or healthcare, while higher borrowing costs could hit consumers and businesses alike.
The Economic Fallout of Debt
Large deficits carry heavy consequences. Studies from Yale Budget Lab and EY’s QUEST practice project that unchecked debt could reduce GDP by $340 billion by 2035, wipe out 1.2 million jobs, and cut private investment by 13.6 percent. These losses would mean fewer jobs and higher prices for families already feeling economic pressure.
Interest payments are another growing burden. The Congressional Budget Office estimates these costs will soon surpass defense spending, squeezing out funding for other priorities. For the average person, this could lead to higher taxes or reduced government services as lawmakers scramble to cover the bills.
Competing Visions for a Fix
Solutions are divisive. Members of the House Freedom Caucus push for deep cuts to programs like Medicaid and green energy credits, alongside strict limits on discretionary spending. They cite the 1920s, when disciplined budgets under President Calvin Coolidge produced surpluses, as a model for fiscal restraint.
On the other hand, Democratic lawmakers and advocates for social programs argue that cutting safety nets harms vulnerable families. They propose raising taxes on corporations and wealthy individuals to fund programs like Social Security and Medicare, drawing on the New Deal’s legacy of using public investment to drive growth.
Investors have their own predictions. The Deutsche Bank poll shows over half expect a crisis to force Congress to act, while 26 percent anticipate the Federal Reserve will turn to quantitative easing, printing money to cover debts. Only 20 percent think markets will accept deficits reaching 9 percent or believe they won’t hit that mark by 2035.
Gridlock in Congress
Washington’s ability to tackle the deficit is hampered by division. A narrow 220–213 House majority and tensions between moderates and hardliners have bogged down budget talks. With debt ceiling deadlines approaching in summer 2025 and 2017 tax cuts set to expire, the reliance on short-term funding patches delays meaningful reform.
This isn’t a new problem. Past budget battles, like the 1995–96 government shutdown and the 2011 debt ceiling standoff, show how partisan divides can derail fiscal progress. Bond markets are growing restless, with 30-year Treasury yields reaching their highest since 2023, signaling investor skepticism about Congress’s resolve.
Looking Ahead
The risks are clear. Recent estimates suggest the debt-to-GDP ratio could exceed 122 percent by September 2025, making it harder for the government to borrow at low rates. This could raise costs for everything from mortgages to business loans, hitting families and entrepreneurs hard.
Global investors are already wary. Foreign buyers of U.S. Treasuries are pulling back, and bond markets are demanding higher premiums to offset deficit risks. Still, the U.S. dollar’s role as the world’s reserve currency keeps demand for Treasuries steady, offering some breathing room.
The challenge lies in balancing today’s needs with tomorrow’s stability. Lawmakers must weigh support for families and economic growth against the need to curb deficits. Whether they can find common ground will shape the nation’s future, and the choices they make will echo for decades.