How High can US Debt go before it Triggers a Financial Crisis?

Excessive government debt has contributed to inflation and is pushing interest rates higher.

 

The government continues to add to the debt by spending more than it receives. The US government receives about $5T in revenues annually. They spend about $7T per year.

 

Higher interest rates and increasing debt is increasing interest payments on the debt at unsustainable levels. 

 

Many are concerned the debt will lead to a financial crisis.

 

The big question is how high can US debt go before it triggers a financial crisis?

 

Government debt is currently about $37T. This is 121% of Gross Domestic Product (GDP).

 

Interest payments are about $1.1T annually. This is about 22% of annual government revenues.

 

Is the US at crisis levels? No. Not yet, but we are on an unsustainable path.

 

If interest on the debt continues to increase at current levels, interest payments will increase to about 30% of revenues in 5-7 years per Moody's.

 

If you have ever applied for a mortgage, you likely would have been declined if your debt to income ratio was above 30%. This is because lenders understand that if interest payments are too high, you are unable to maintain the payments.

 

The solutions are to increase income, reduce spending, or both. You already know this. You do this with your household budget.

 

The Trump administration is attempting to increase income via tariff income and reshore manufacturing to boost the economy (increase income).

 

The Department of Government Efficiency (DOGE) is attempting to reduce fraud and wasteful spending.

 

Only in Washington is common sense considered radical.

 

 

The US government's lack of financial responsibility creates an opportunity.

 

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