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Commentary: The bill for US national debt is becoming frighteningly high. It is increasingly dominating politics.
🇨🇭 Switzerland /Economy & Trade

Commentary: The bill for US national debt is becoming frighteningly high. It is increasingly dominating politics.

From Neue Zürcher Zeitung · () German

Translated from German, summarized and contextualized by DistantNews.

At a glance

Analysis Sources not specified Context piece
  • The US national debt has surpassed $40 trillion, equating to $117,000 per capita.
  • Interest payments on this debt are projected to exceed $1 trillion in 2026, surpassing the military budget.
  • This escalating debt burden is increasingly dominating US politics and raising concerns among investors.

The United States' national debt has ballooned to over $40 trillion, a staggering figure that translates to approximately $117,000 in debt for every American. This immense financial burden is beginning to cast a long shadow over the nation's political landscape and financial markets.

There is no 'free lunch'; debt only postpones costs. If debt economics gets out of hand, savers always suffer in the end.

— CommentaryThe article begins with a commentary on the nature of debt and its long-term consequences.

Economists generally justify government debt when its expected return or future economic growth impact outweighs the interest costs. However, in the U.S., a significant portion of government funds are not directed toward future-oriented investments. Instead, the Congressional Budget Office projects that interest payments alone will consume 19% of federal revenue this year, exceeding the budget allocated for the entire U.S. military.

The market for American government debt (Treasuries) is the largest and most important bond market in the world.

— CommentaryThe article highlights the significance of the U.S. Treasury market due to the sheer volume of debt.

By 2026, interest payments are expected to cost the U.S. over $1 trillion annually, or about $12,100 per four-person family. This escalating cost of servicing the debt is inevitably becoming a political issue. Former President Donald Trump has frequently criticized high interest rates, questioning why the U.S. pays more than Switzerland, whose economy he argues is bolstered by American strength.

The Congressional Budget Office estimates that 19 percent of revenues will be spent on debt servicing this year. That is more than for the entire U.S. military, for which 16 percent is allocated.

— CommentaryThe article points out the disproportionate amount of federal revenue going towards debt interest compared to defense spending.

However, such comparisons overlook fundamental economic differences. The U.S. experienced an inflation rate of 3.4% in July, with current fiscal policies likely to sustain or increase it. Switzerland, in contrast, had inflation of only 0.4% and a nearly balanced state budget. Consequently, U.S. nominal interest rates are necessarily higher. The yield on 30-year U.S. Treasury bonds has already surpassed 5%. These long-term interest rates hold significant political importance.

Interest payments are expected to cost the U.S. for the first time over a trillion dollars in 2026.

— CommentaryThe article forecasts a significant milestone in the cost of servicing the national debt.
DistantNews Editorial

Originally published by Neue Zürcher Zeitung in German. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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