A Deep Dive Into U.S. Debt

The longer the U.S. debt is left to grow, the harder it will be to correct.

The most popular economic article I have ever written was a cautionary tale about the national debt of the United States. I warned that it was on a troubling trajectory, and implored policy makers to take corrective action before it was too late.

I thought the content was well-constructed, but that wasn’t the reason that the piece was so popular. The essay was phrased as an open letter to my baby daughter about the financial future she, and others of her generation, might face. The inclusion of a cute picture of her crawling around our family room floor was a blatant attempt to boost ratings, and it worked.

Nostalgia sets in when I remember that piece. Both the baby and America’s fiscal position were relative innocents back then: my daughter was 10 months old, and the Federal debt was about $5.5 trillion. The former is now in her mid-twenties, and the total national debt stands at more than $33 trillion.

The level of concern about the size and sustainability of U.S. debt has increased substantially this year. The deficit for fiscal year 2023 is projected to be around $2 trillion, an unusually large amount during a period of strong economic growth. Rising interest rates make the cost of carrying the debt much more significant. And political dysfunction in Washington raises serious questions about the soundness of fiscal policy.

In response to a rising number of client questions, we’re devoting our entire issue this week to an analysis of the American fiscal picture. We’ll attempt to diagnose how we got here, anticipate where we are going, and offer some potential remedies. We will also tackle the question of whether the United States is close to a breaking point at which the debt becomes too great for the market or the country to bear.