The US is suffering a chronic debt crisis, not an acute emergency like Argentina's defaults or Greece's 2010s woes, but a slow-burn disaster everyone can see coming. Federal debt held by the public has risen from $3.4tn in 2000 to $32.3tn now, climbing from 33.7 per cent to more than 100 per cent of GDP in just over 25 years. Debt-servicing costs have doubled, from 11 per cent of tax revenues in 2000 to 21.5 per cent in the first 10 months of the current fiscal year.

With deficits running close to 6 per cent a year even at full employment, the debt-to-GDP ratio is set to rise annually, increasing pressure on the Federal Reserve to lower interest rates. Primary public spending has risen from 15.5 to 19.9 per cent of GDP, driven by social security, Medicare, and veterans' programmes, while revenues have fallen from 20 per cent to 17.2 per cent, partly due to the Bush and 2017 Trump tax cuts. The Centre for American Progress estimates that had the 1990s tax system remained intact, US public debt would now be stable.

Treasury secretary Scott Bessent has promised deficit reduction but his credibility is thin. The now-disbanded Department of Government Efficiency failed to deliver spending cuts, and Donald Trump's One Big Beautiful Bill Act spent tariff revenue without raising other taxes. Bessent's promise of 3 per cent growth and a 3 per cent deficit stands at roughly 2 per cent and almost 6 per cent respectively. The US has no sure-fire escape without significant spending cuts or tax increases.