Is the US national debt growing out of control? Predicting when or if a tipping point may be reached is difficult (or impossible), but the country faces growing fiscal challenges as its soaring interest burden is heightening concerns about long-term debt sustainability.
03 September 2025
Deficits are expected to continue at or near current levels
Source: US Treasury. US Congressional Budget Office (CBO). Data as of 31 July 2025.
To be clear, there is no indication that a crisis is imminent. The federal government has operated with a deficit for much of its existence, and this has not resulted in significant challenges for either the bond market or the broader economy.
That said, increasingly perilous debt dynamics could eventually create problems without corrective measures.
A large increase in the risk premium on US Treasuries seems unlikely, but debt sustainability continues to matter. If the issue comes to a head, inflation and financial repression would likely follow, and austerity could be the only way out.
Long-term debt sustainability is fundamentally a function of future GDP growth, not just current deficits. Technological change — particularly from generative AI — could be a primary driver and determinant of growth and thus fiscal sustainability.
Jason Davis is an investment analyst with 10 years of industry experience (as of 12/31/2024). He holds a master's degree in economics from the London School of Economics and Political Science and a bachelor's degree in economics from the University of Nottingham.
Doug Kletter is an investment analyst with 13 years of industry experience (as of 12/31/2024). He holds dual bachelor's degrees in finance and economics from the University of Maryland graduating summa cum laude.
Arjun Madan is an investment analyst with 25 years of industry experience (as of 12/31/2024). He holds an MBA from the Wharton Business School and a bachelor's degree in commerce from the University of Delhi.