The United States’ national debt — now exceeding $38 trillion and more than 120% of the nation’s annual economic output — poses severe long-term risks, according to a new set of essays released by the nonpartisan Peter G. Peterson Foundation. A diverse group of leading economists and historians examined the dangers mounting for America’s economic resilience, global leadership, and financial markets. Their conclusion: the U.S. is taking an increasingly perilous fiscal gamble.
Council on Foreign Relations President Emeritus Richard Haass and NYU professor Carolyn Kissane offered a blunt assessment: “In simpler terms, we are guilty of spending our rainy-day fund in sunny weather.” They argue that the nation now lacks critical financial flexibility needed to respond to major crises — whether geopolitical or economic.
Debt Payments Now Outpace Defense Spending
U.S. interest payments on existing debt have surged to roughly $1 trillion per year, now surpassing national defense spending. Economist Heather Long described the 2020s as “fast becoming the era of big permanent deficits,” with annual shortfalls — even during periods of low unemployment — projected to remain around 6% of GDP. This is a stark contrast to historical norms, when substantial budget gaps usually occurred during recessions or wartime.
Experts also caution that the strategies that once helped slash the national debt are no longer viable. Economist Barry Eichengreen noted that the post-World War II recovery was propelled by rapid growth and low interest rates. Similarly, the 1990s progress benefited from the “peace dividend” that allowed deep defense cuts. Today, none of those advantageous trends exist.
Global Threats Demand More Spending, Not Less
Eichengreen also emphasized that modern geopolitical tensions — from Russia and Iran to the South China Sea — are pushing defense needs higher, not lower. Complicating matters is a highly polarized political climate that hinders compromise, especially around major entitlement programs widely considered untouchable.
That leaves one realistic lever: revenue. With tax receipts relatively low compared to peer nations, many experts say the U.S. will need to increase revenues to restore fiscal stability.
National Security at Risk
Haass and Kissane warn that every dollar directed toward interest payments is a dollar unavailable for crucial priorities like defense, cybersecurity, and public health — resulting in a dangerous erosion of domestic resilience. They call the current situation a crisis unfolding “in slow motion,” one that democratic governments find particularly hard to confront before it becomes catastrophic.
Avoiding a sudden market shock doesn’t mean avoiding the crisis, they caution. Like the proverbial frog in slowly warming water, complacency could prove lethal: “The day will come when the boiling water finally kills the frog.”
Dollar Dominance Faces Historic Pressure
Historian Harold James framed the moment as “the middle of a very dangerous experiment with the U.S. dollar, and with the international monetary system, whose fundamental driver is a fiscal gamble.” He pointed to political risks and potential interference in institutions — including the Federal Reserve — as threats to global trust in American financial stability.
Princeton professor Layna Mosley cited former French President Valéry Giscard d’Estaing’s famous description of the United States’ “exorbitant privilege.” For decades, the global reliance on the U.S. dollar has allowed the nation to borrow cheaply and abundantly. Now, she argues, political turmoil and unpredictable policy choices jeopardize both that privilege and the international order that supported it.
Economic Shock Could Hit Everyday Americans
If global markets lose confidence, borrowing costs could spike overnight — causing painful increases in mortgage and loan rates for families and businesses nationwide. Haass and Kissane compare the U.S. approach to skipping insurance simply because disaster hasn’t struck yet: a bet that could prove devastating.
