US national debt exceeds the country's GDP: The White House does not consider this a problem.

For years, fiscal discipline advocates have been trying to find a way to force politicians and the public to take the rapidly growing federal debt seriously. They believed such a moment had finally arrived. The US had crossed a psychologically significant threshold—debt had exceeded 100% of GDP, writes The New York Times.

In recent years, the Commission for a Responsible Federal Budget has repeatedly warned of risks to US fiscal sustainability, but this time, in its assessment, the signal was particularly serious. The organization calculated that in March, the amount of federal government debt held by private owners exceeded the country's annual GDP. The Peterson Foundation (a nonprofit that studies budget policy and US government debt) called this a "troubling fiscal milestone."

However, this did not provoke any noticeable reaction - apart from a few gloomy speeches and analytical columns.

On the subject: 10 Signs the US Economy Isn't as Bad as the News Makes You Think

Just a week later, Defense Secretary Pete Hegsett testified before Congress, defending the largest Pentagon budget request in U.S. history. Meanwhile, the Senate continued to advance a $72 billion package to strengthen immigration controls, using the budget reconciliation process, which bypasses a potential filibuster and temporarily waives its own deficit cap.

The mere crossing of 100% of GDP doesn't fundamentally change anything. Debt isn't a reservoir that begins to overflow when it reaches a "critical level." "99 is a bad number. 101 is worse than 100. We emphasize 100 simply because it's a round number," noted Peterson Foundation CEO Michael Peterson.

What's more important is that there are no signs of a reversal. And if even this threshold doesn't force the authorities to act, then what could possibly work?

How the US arrived at its current situation

The national debt has grown due to the costs of overcoming the 2007–2008 financial crisis and the pandemic recession, increased costs for an aging population, a series of tax cuts without a comparable reduction in spending, and rising interest payments on the debt itself.

The last time US federal debt exceeded GDP was immediately after World War II. However, the situation quickly changed: by 1974, the debt-to-GDP ratio had fallen to 23%, thanks to economic growth, periodic budget surpluses, and inflation, which reduced the real value of the debt.

The picture is different now. According to the Congressional Budget Office, the debt will continue to grow and reach 175% of GDP by 2056.

For a long time, ultra-low interest rates made debt servicing relatively inexpensive. That's no longer the case: the yield on 30-year US Treasury bonds reached 5,12% this week, the highest since 2007 (versus approximately 1% in 2020). Federal budget interest payments already exceed defense spending. As the debt grows, the government is forced to borrow more and more, including to service its accumulated liabilities.

Morgan Stanley Wealth Management Chief Economist Ellen Zentner says clients constantly ask whether the current US debt trajectory is sustainable. "For me, it's one of the simplest questions. The answer is no," she notes.

Skeptics, however, point to Japan, where the debt burden is significantly higher: according to the IMF, it amounted to 201% of GDP in 2024.

But there is an important difference: Japanese debt is almost entirely held domestically, while the US relies heavily on foreign investors.

Boston University economist Laurence Kotlikoff believes that, given social security and healthcare obligations, the US is worse off than Italy, looking beyond the official figures. "Nobody's willing to say outright: 'We have a problem,'" he said.

University of Pennsylvania economist Enrique Mendoza believes that stabilization alone is not enough. He argues that reducing debt to 60% of GDP or less would give the government room to borrow during the crisis and ease the pressure on the economy, allowing the private sector to grow faster.

However, this scenario currently appears unrealistic. The White House is requesting $1,5 trillion for defense in the 2027 budget (a 44% increase), while making almost no contribution to social spending programs, which form the bulk of long-term commitments. The Deficit Reduction Commission, led by Elon Musk, achieved only about $1 billion in sustainable savings last year—roughly one-tenth of one percent of the stated goal.

There is alarm, but no action.

There are signs that concerns are growing. Rising Treasury yields are driving up mortgage costs, directly impacting households and making the deficit problem more acute, notes Desmond Lachman of the American Enterprise Institute.

According to Gallup, in March, half of Americans said they were seriously concerned about government spending and the deficit—roughly on par with inflation and the state of the economy. Only the availability and cost of healthcare were more concerning.

Fiscal discipline advocates are trying to exploit this sentiment. Publications about exceeding 100% of GDP were one such attempt. However, economist Benjamin Larin of Jönköping University, who studies the impact of "round" thresholds on inflation expectations, believes the effect will be limited.

According to him, public debt is too far removed from everyday experience and is perceived mainly through the media and political rhetoric.

Interestingly, in 2011, when debt stood at around 66% of GDP and the economy needed fiscal stimulus, anxiety levels were higher. But crossing the 100% mark prompted virtually no reaction—it was no longer perceived as a warning sign.

You may be interested in: top New York news, stories of our immigrants, and helpful tips about life in the Big Apple - read it all on ForumDaily New York

Harvard economist Jason Furman acknowledges the risks but notes that it is difficult to see clear negative consequences for the economy.

“If someone in 2000 had been asked to imagine an economy with debt at 100% of GDP and a deficit of 6% of GDP, they would likely have expected extremely high interest rates or even a severe crisis,” he wrote in a paper for the Aspen Institute in 2024.

However, this didn't happen. And as long as there's no crisis, it's easier for politicians to do nothing than to take painful measures—whether raising taxes or cutting spending.

This inaction irritates advocates of austerity. "Now is precisely the moment when leadership is needed," said Michael Peterson. "And that's not the responsibility of citizens, but of their elected officials."

Read also on ForumDaily:

The 35 Youngest Millionaires in the World: 12 of Them Made Their Fortunes on Their Own

11 stupid expenses that prevent you from accumulating wealth: wealth strategy from Warren Buffett

Trump's importer duty refund system is now live: How applications are being accepted and payments are being processed

Do you want more important and interesting news about life in the USA and immigration to America? — support us donate! Also subscribe to our page Facebook. Select the “Priority in display” option and read us first. Also, don't forget to subscribe to our РєР ° РЅР ° Р »РІ Telegram  and Instagram- there is a lot of interesting things there. And join thousands of readers ForumDaily New York — there you will find a lot of interesting and positive information about life in the metropolis.