National Review Online
Friday, August 21, 2026
It was only four years ago when the national debt
surpassed $30 trillion. This week, for the first time in history, the national
debt reached $40 trillion — and counting. Time flies when you’re running
gargantuan deficits year after year.
The benchmark is somewhat symbolic, as our $40 trillion
total debt includes liabilities owned by parts of the federal government, such
as retirement trust funds. Economists prefer to measure debt held by the
public, or external creditors, which stands at $32.27 trillion. Still, that true debt is roughly
equal to the entire annual output of the U.S. economy — or more than triple
what it was at the start of the century.
Over the next decade, public debt is expected
to balloon by tens of trillions more under current law as annual deficits —
the gap between federal spending and revenues — surge past $2 trillion, then
past $3 trillion. By 2055, projections indicate that debt will reach 175 percent of
national income, far higher than the country’s historical peak after World War
II. Actual debt will almost certainly be much higher, as current projections
assume no future wars, recessions, tax cuts, or new spending programs.
Exploding national debt doesn’t feel costly to Americans
today, but the price is paid in annual interest expenses. The government is set
to spend more than $1 trillion on interest payments alone to current debt
holders, making it the third-largest spending item in the budget behind Social
Security and Medicare.
Growing interest costs — resulting from both a larger
debt and higher interest rates on Treasury bonds — produce a vicious fiscal
cycle. They go directly on the national credit card, incurring even greater
interest costs the next year, which again add to the national debt, and so on.
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.
Soon enough, the bill will come due, and the fiscal
treadmill may break. The Penn Wharton Budget Model estimates that, on the current trajectory, the government
will have no choice but to default on the debt within 20 years. Default might
be either explicit, sparking a global financial meltdown, or implicit, through
perpetual money-printing and high inflation.
More likely, forward-looking markets may compel an
earlier fiscal reckoning that forces radical and destructive changes. Promised
benefits may need to be slashed, broad-based taxes practically doubled, or a toxic combination of both simply
to stabilize the debt and prevent catastrophic default.
There are no easy solutions, because the causes of the
debt are not what political demagogues claim. Despite recent tax cuts, federal
revenue as a share of GDP is at approximately the same level as it has been
for the past 75 years. Defense spending is also not to blame, as it constitutes
a historically small and shrinking percentage of the economy.
The real driver
of national debt is ever-increasing social spending, particularly on
entitlement programs — Social Security, Medicare, and Medicaid — whose growth
is attributable to an aging population and mounting health-care expenses.
Because these programs run on autopilot and are overwhelmingly popular,
lawmakers of both parties have no incentive to touch them before it’s too late.
There are still several
ways to reform entitlements by restraining their cost growth and reducing
benefits for the highest earners. But the choices get worse the longer we wait,
just as they are far more difficult now than they were years ago.
The first thing Congress has to do is quit throwing fuel
on the fire with even more unpaid-for spending. Republicans, especially, must
relearn their commitment to fiscal responsibility, since Democrats never had
one to begin with. Then, lawmakers will need to level with voters about the
cold, hard trade-offs they face.
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