America Is Living on Borrowed Money

The federal debt is as old as the nation, and adding to it is sometimes prudent. For governments confronting existential crises like wars or pandemics, borrowing makes sense as a way to mobilize national resources, as the economist Barry Eichengreen wrote in the 2021 book “In Defense of Public Debt.” Government borrowing and spending are necessary to stimulate the economy during recessions. And Treasuries, safe and liquid, play a critical role in the global financial system — so much so that in the late 1990s, when a period of economic growth and reduced military spending allowed the government to sharply reduce borrowing, economists and bankers raised alarms about the consequences of too little federal debt.

The United States, however, now borrows heavily during periods of economic growth to meet basic and ongoing obligations. It’s increasingly unsustainable. Over the next decade, the Congressional Budget Office projects that annual federal budget deficits will average around $2 trillion per year, adding to the $25.4 trillion in debt the government already owes to investors.