Right-wing political commentators and many of their frum followers fret over the national debt. These fiscal fears arise from the reality that the USA borrows incessantly to finance an enormous, expanding Federal budget deficit. The debt as of April 2026 is approaching $39 Trillion (!!!) and rising fast, both in absolute terms and as a percentage of national income or GDP.
And if we start taking into account unfunded future liabilities for Social Security, Medicare, etc., the sums indeed become dizzyingly massive.
History of US Debt, Visual Capitalist
But while it may seem like our national economy is headed for an imminent debt-fueled collapse, a deeper look shows that these concerns are overblown. Here’s why.
Comparing Salmon and Jellyfish
Many think about money in terms of microeconomics. If a typical family keeps borrowing to enable overspending, they’ll probably end up in serious trouble. But a family’s finances and the Federal Government’s are as similar as a Paskesz jellyfish is to a salmon—alike in name only.
Most fundamentally, unless the USA completely ceases to function as a country, it technically can’t run out of money to pay its debts, as an individual or business can. Because the USA only borrows in US dollars, which it can print at will, the government can literally pay off its debt at any time by generating trillions of extra dollars!
Now, printing that much additional currency suddenly would lead to hyperinflation, as each dollar would lose much of its purchasing power, but if done over time, it would likely lead to a malaise, not a catastrophic bankruptcy. But, even by the standards of family finance, the Federal Government’s debt situation is not nearly as bad as right-wing pundits and gold-brokerage companies would have you believe.
Comparing US Taxpayers’ Debt To Assets
Those who obsess over Washington’s excessive borrowing misunderstand or misstate just how much wealth is backing the USA’s debt obligations. Comparing its debt to its current income (GDP) is simply not a proper indication of solvency. Much more important is its overall current wealth and ability to create future income. And in both those categories, the USA looks far better off than the above chart indicates.
The US Is the Planet’s Richest Entity
Yes, the US Government now owes about $39 trillion, and there are gargantuan future liabilities in the form of pension and other promises too. But the Federal Government has untold current wealth and future income backing its borrowing. The bonds of the US Government are backed by all the assets, resources, and income potential of the wealthiest group of individuals in history… the taxpayers of the USA!
Through the power of taxation (itself backed by the full might of the Justice Department and the military), the Federal Government has access to hundreds of trillions of dollars in assets owned by its citizens and big chunks of its future productivity.
America’s Balance Sheet
When you look at America’s “balance sheet,” you need to consider not just its debt but also its assets. This collective fortune of US taxpayers, the real guarantors behind federal debts, includes all residential and commercial real estate, everyone’s holdings in stocks, bonds, and private businesses, etc., a massive sum. Baird, for example, estimates this balance sheet at about $142 trillion in financial assets against $39 trillion in debt, not a crazy ratio.
America’s Income Power
Even more valuable than Americans’ current assets is their future income potential. The USA is a powerhouse of creating wealth, which can and will be taxed to pay its bills and debts. By international standards, Uncle Sam has a very light hand, as you can see in the chart below.
The US could balance its budget by simply raising its relatively low tax take (averaging about 27% of GDP), to the rates charged by England, Japan, and Canada. By raising rates to the 40% rates normal in much of Europe, the entire Federal debt could theoretically be paid off in less than a decade!
Deficit Is Mostly About Politics, Not Finances
So, if there is so much available wealth to cover the Federal budget, why do Washington, D.C. politicians keep borrowing instead of balancing the budget by raising taxes? The simple answer is that modern Americans hate paying taxes as much as we did in the days of the Boston Tea Party! You hate taxes. I hate taxes. We all hate taxes.
But US voters have also developed Europe’s taste for extensive social spending. The spigots of cash unleashed with minimal oversight after the COVID crisis offer the best example: the government sprayed trillions, and even wealthy companies, barely affected by the pandemic, walked off with buckets of “free” taxpayer money! America also has the world’s largest military budget by far. So, how to pay for the goodies while keeping tax rates relatively low?
It’s a lot easier and politically convenient for public “servants” to borrow more money than to raise taxes or cut spending. So, rationally, politicians who want votes and keep their jobs run a deficit, and the debt keeps rising.
As long as Americans love government services and programs but not paying for them, Uncle Sam will keep borrowing to run deficits. But with the country’s vast stores of wealth and tax-generating potential, covering these debts is a political, not a financial, problem for the foreseeable future.
Growth Potential Is the Key
In truth, there’s nothing wrong with a powerful economy running a debt-financed deficit and, within reason, it can be financially advantageous to do so. High taxes sap business growth, and as any savvy businessman will tell you, long-term, low-interest debt can fuel it! As long as the US economy grows more rapidly than its debt, we can have our cake and eat it too!
If America keeps producing top-level wealth-creating citizens and companies, it’ll be fine financially. The key factors for the USA’s financial prowess are political stability, global security, and the long-term ingenuity, industriousness and earning power of Americans as a whole.
And that’s why sophisticated financial thinkers are far more concerned with the sorry state of America’s decaying education, infrastructure and political systems, far more than the burgeoning national debt.
Tachlis, Taxes, Inflation, and Diversification
While I don’t fear a debt-fueled collapse of the American economy, investors do need to consider the long-term risks of much higher taxation and inflation.
Bottom line, US federal debt IS growing far faster than GDP at this point, as the first chart above makes clear. Probably, politicians will eventually have no choice but to tax Americans much more heavily, either directly or indirectly, by printing dollars. So long-term tax strategy and inflation protection are a must.
In addition, there’s no guarantee that America’s ability to grow its economy and stock market far more powerfully than the rest of the world goes on indefinitely.
(See the image below for food for thought. Look especially at Japan’s stock market expansion and collapse from 1970 to 2000.)
America “won” most of the 20th century. What does its future hold? Very hard to tell. Another reason why diversification isn’t optional.
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