The U.S. GNP in 2025 had been
$30.77 trillion (nominal). Even though that represents a real growth rate of
2.1 percent, according to the U.S. Bureau of Economic Analysis, the total dollar-amount
of economic output of the bloc was almost $10 trillion lower than the total federal
debt, and this does not count the respective debts of the member-states. In
fiscal year 2025, the net-interest paid on the federal debt amounted to $970
billion, which translates into nearly 20 percent of the federal government’s
revenue and exceeded the $917 billion in defense spending. The milestone of $40
trillion in federal debt, reached on August 19, 2026, can thus be put into
perspective at the federal level of government. It is no wonder that Europeans had
been raising concerns regarding the issuance of federal debt by which the E.U.
could aid Ukraine militarily. Things can get out of hand, fiscally, at a federal level.
The Reagan, Bush, and Trump
tax cuts, along with the increases in both social and military spending over
those decades, can be cited as having exasperated the federal debt. The words
of Kush Desai, a White House spokesman, regarding the approach of the second
Trump administration in “slashing waste, fraud, and abuse in federal spending
while accelerating economic growth to get America’s debt-to-GDP ratio trending
in the right direction” can be regarded as insufficient, given the huge size of
the federal debt.[1] By
insufficient, I mean to suggest that an orientation to waste and abuse
in the context of extended tax-cuts and an increasing defense budget does not
take the amount of debt seriously enough. Even the orientation to the
debt-to-GDP ratio leaves out the intragovernmental implications of the debt in
terms of spending on interest, for example. Furthermore, GDP is only loosely
related to whether any of the debt might get paid off. The electorates would
have to elect representatives who in turn would be inclined to spend more tax
revenue, even probably increasing taxation, to retire some of the debt. Democracy
itself may be inherently oriented to the mentality of spend now by debt and pay
(off the debt) later, given the instinct of instant gratification. Electing
representatives who are oriented instead to tax cuts and cutting wasteful
government spending can be viewed as a manifestation of that very instinct
because the orientation can function as a subterfuge. In short, economic output
does not translate directly into paying off a public debt; electorates do, and
more than the changes in their wages and salaries, it is their political judgment
(and values, especially in terms of responsibility itself) that is decisive on
whether an extant debt gets paid off. To be sure, the relation of the total
amount of public debt to a year’s total economic output is an indication of how
long (and how much) it would take for taxpayers to be able to pay off the debt,
given their taxable incomes, but the sheer enormity of amount of the accumulated
debt and its relationship to the total amount of the government’s annual budget
are crucial indicators of whether fiscal policy has become too unbalanced to be
tolerated, politically.
This is not to say that being
$40 trillion in federal debt does not matter in macroeconomic terms (i.e., to
the American economy). Experts were already saying in 2026 that the U.S. debt
was “already affecting Americans’ pocketbooks by raising borrowing costs for
things like mortgages and cars, lowering wages from businesses that [had] less
money available to invest, and creating more expensive goods and services.”[2]
Accordingly, Michael Peterson, CEO of the Peter G. Peterson Foundation, a think
tank oriented to fiscal policy, said, “If we want to improve our living
standards, today and for the next generation, now is the time for lawmakers to
put our nation on a more affordable and sustainable path.”[3]
To be sure, besides being focused on the nation, and thus not looking at its
federal system (i.e., how much public debt was being held by the
member-states), Peterson was also discounting the financial drag that is
involved in using (and even increasing) federal revenue to pay off debt rather
than spend tax dollars in ways that would boost economic growth.
I submit that the extent of
the imbalance between the revenues and expenses of the U.S. federal government
is itself worthy of attention, for such a large debt means that even the Keynesian
policy of having deficits during recessions that would be paid off during periods
of economic growth—again, as if GDP were decisive—has been exploited such that
deficits have become the norm whether in times of boom or bust. The human
instinct for instant gratification can and should be effectively
countered both in the psyche and in legislative bodies by the use of reason,
unless of course Plato’s theory of a just republic is utterly unrealistic. Reasoning,
whether at the ballot box or in a legislature, that is oriented to government (and
the very republic!) as a going concern rather than as effectively bankrupt can
and ethically should act as a restraint on the passions to spend without
having to immediately pay. Even if the majority of voters in an electorate are
just fine with government spending without sufficient revenue (taxation),
elected representatives can legitimately push back without being accused of
double-crossing or betraying their constituents. This is one reason why U.S.
senators have a six-year term; even the Electoral College, as it was intended
in the Convention, was to be a device by which a federal president could be
elected for the good of the country rather than from the momentary passions of the
citizens of a member-state. The U.S. House was intentionally designed to be more
reflective of an electorate’s momentary passions, but the devise of representation
itself mitigates this reflection to some extent, even in spite of the term
of office being only two years. The size of the federal debt may indicate that
such safeguards within the complex architecture of the U.S. Government have not
been efficacious. In other words, the federal government itself may have gotten
severely out of balance in terms of electoral politics and governance.
2. Ibid.
3. Ibid.
