Our Best Stuff on Crossing the $40 Trillion Debt Threshold
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TL;DR
- The U.S. national debt has surpassed $40 trillion.
- Government spending has shifted from defense to interest on debt and entitlement programs, despite tax revenues as a percentage of GDP remaining stable since WWII.
- High interest rates, partly due to the size of the debt, contribute to increased borrowing costs and can lead to a debt-interest rate spiral.
- This spiral involves rising debt forcing more borrowing, which increases interest rates, further swelling the debt.
- While the U.S. is unlikely to default like Greece or Argentina, such spirals can cause significant economic damage.
- Treasury Secretary Scott Bessent's plan to buy back longer-term bonds has had limited market impact.
- Populism is identified as a major obstacle to implementing necessary fiscal reforms, which require tough choices.
- Former Speaker Paul Ryan's past entitlement reform proposals faced strong political opposition.