One of the challenges involved in educating voters about the impact of the federal debt is that the numbers are unfathomable: $38 trillion and counting. More than $112,000 for every person in the country. A stack of $100 bills reaching from Washington, D.C. to far outer space.
But what really matters is what the debt means for the American people today. We are already seeing the short-term impact of the mounting debt, putting upward pressure on interest rates, which makes buying a house, a car, or using a credit card more expensive. Over the long term, the growing national debt increases the risk of a significant economic crisis.
That’s why a growing chorus of global bank CEOs, former Federal Reserve Presidents, investors and economists are raising an alarm about what a debt-driven economic crisis would look like, and how it would harm regular people.
This is what they’re saying: Ray Dalio, billionaire founder of Bridgewater Associates, predicts the federal debt will trigger “an economic heart attack.” David Solomon, CEO of Goldman Sachs, says “there will be a reckoning.” Even Elon Musk says that “if this continues, the country will become de facto bankrupt.”
The federal government spent $7 trillion in fiscal year 2025, while only bringing in $5.2 trillion in revenue — a deficit of $1.8 trillion. In the past, deficit spending tended to increase during times of crisis like wars and recessions and then recede. However, that pattern has been broken since the end of the COVID pandemic.
We now have consistently high annual deficits, more than 6 percent of the gross domestic product (GDP), as opposed to the average deficit of 3.8 percent of GDP over the past 50 years. This shift toward routinely higher deficits has been fueled both by increased spending and tax cuts. And worse, there is no coherent plan to fix the problem.
For decades, U.S. Treasury bonds were considered to be effectively risk-free due to the economic strength of the United States, the assumption that the Federal Reserve would defend the dollar from inflationary pressures, and of course, the U.S. government’s guarantee of payment. As a result, we were able to command a very favorable interest rate on our debt. Now, the demand for U.S. bonds and our preferential interest rates are at risk. In fact, all three major credit rating agencies have downgraded the U.S. from their top AAA standard, citing the ballooning debt, interest payments, and poor fiscal governance.
As questions about America’s ability to roll over debt at favorable interest rates grows, bond buyers will require a greater return to account for that risk. As Dalio says, the U.S. would be “selling into a world that does not really want to buy that amount of debt anymore because they have a lot of it.”
Demand for higher interest rates on Treasuries, combined inflation fears, can create a spiral of concern. Kent Smetters, the head of the Penn Wharton Budget Model and a former Treasury Department official, describes a vicious cycle: “If you know the government’s going to pay you back by printing dollars, you’re going to demand a higher return. But how are they going to pay that back? Print even more dollars, so you’re going to demand even a higher return. Rationally, that is where you get these really big spikes in inflation over time.”
The worst case scenario is one of “fiscal dominance” where the United States’ massive debt overpowers the ability of the Federal Reserve to fight inflation through monetary policy. We could be forced to address the problem with fiscal policy, in other words, a choice of extreme austerity, including massive tax increases and benefit cuts, or hyperinflation.
Right now, the United States is a colossus but the debt is our feet of clay. We can fix the problem in a disciplined fashion if we act now. But if we have to address our debt in a moment of crisis, it will undermine our international leadership and put us at a sharp disadvantage with respect to rising economic powers like China. Historians and others including Dalio have pointed to the propensity for great nations in history to become fiscally overextended and then decline — often leading to serious geopolitical instability and economic hardship.
We don’t know when an economic meltdown would happen or exactly what form the crisis would take, but we should not run the experiment. It’s better to learn from history than repeat it. Let’s practice wise governance and fix the debt before it is too late.
First, Congress must establish regular order around the budget process so that budget targets are established early in the calendar year and appropriations bills are passed before the end of the fiscal year. A No Budget, No Pay law would provide a helpful nudge in the right direction by giving our representatives a financial stake in a disciplined budget process.
Second, re-establish strong PAYGO standards that ensure that new legislation does not add to the debt and strengthen existing statutory PAYGO standards to enforce accountability when Congress fails to meet budget targets.
Third, establish and commit to a plan for action to balance the budget over the next decade. Legislation like the Fiscal Commission Act can help with this. Our goal should be to cut the annual deficit in half by 2030 to 3 percent of GDP with a path to zero deficit, including interest, within the decade.
Working Americans may not have the same interest in the details of economic data as banking CEOs, but they know it’s not sustainable to spend more than you take in, year after year. And they know Congress isn’t being a strong fiscal steward. It’s no coincidence that congressional favorability is only 15 percent. House and Senate leadership in both parties must pull themselves together and restore some baseline institutional integrity to the federal budget and budget process and by extension to Congress itself.
Rep. Carolyn Bourdeaux is the Executive Director of Concord Action and is a former Member of Congress from Georgia.