Tag: debt

Coming Soon – Federal Red Ink Barfing Skyward Like You’ve Never Seen

Self-evidently, the news has been overwhelmingly focused on Washington’s current endeavor to unload $200 billion of imperial destruction upon Iran and its neighbors around the Persian Gulf. Well, and also upon all other users of petroleum products, LNG, LPGs, nitrogen fertilizer, food, helium, semiconductors, manufactured goods and most everything else anywhere on the planet.

Accordingly, comparatively scant attention has been given to another recent milestone on America’s headlong dash to fiscal disaster. To wit, the public debt crossed the $39 trillion mark and nearly in the blink of an eye, too. Just four years ago, we were at the $29 trillion level and nine years ago at the $19 trillion mark.

Needless to say, the “peacemaker” in the Oval Office has played no small role in this skyward ascent of the public debt. During his first term, the public debt grew by a staggering $8 trillion and already another $3 trillion has been racked-up during his second go-round.

Stated differently, the King of Debt has surely earned his place in the history books. The $11 trillion of new debt on his watch to date already accounts for 28% of all the public debt incurred in America since George Washington!

Then again, he still has got nearly three years to go, and the debt impact of both the OBBBA and the impending financial and human bloodbath in the Persian Gulf are just getting started.

Indeed, as to the latter it’s as clear as the orange glow around his cranium that the Donald is doing another round of fake rope-a-dope negotiations with the Iranians. That’s to buy time to get the 82nd Airborne, various amphibious landing ships and other invasionary forces in place for his next “win”.

That’s right.The fool in the Oval Office is actually going to attempt to seize the Alamo Kharg Island. That will mean military chaos in the Gulf, unprecedented turmoil in the global economy and soaring military expenditures, which will make the pending $200 billion DOD supplemental look like a mere down-payment.

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10 Years Ago Today, Trump Promised To Eliminate the National Debt. Instead, It Has Doubled.

Ten years ago today, Donald Trump said he would pay off the national debt in the span of just eight years.

That did not happen. Instead, the gross national debt has doubled since that day—from about $19 trillion to over $39 trillion. Much of that additional borrowing has taken place during Trump’s five-plus years in the White House.

The gap between Trump’s outlandish promise and the brutal fiscal reality of the past decade is not just a political gotcha. It’s also an apt illustration of how far and how fast the debt has spiraled. And it’s a painful reminder of a missed opportunity that Americans will be facing for a long, long time. The bill for these 10 years of fiscal profligacy will be coming due long after Trump has finally departed from the political scene.

But it’s a story that starts, as everything in politics seems to these days, with Trump.

“We’re not a rich country. We’re a debtor nation,” is what then-candidate Trump told The Washington Post in an interview on March 31, 2016 (a full transcript was published two days later). “We’ve got to get rid of the $19 trillion in debt.”

How long would it take to do that, asked the Post‘s Bob Woodward.

“Fairly quickly,” Trump replied. When pressed for a more specific answer, Trump provided a shocking timeline. “Well, I would say over a period of eight years.”

That was never going to happen. As the Committee for a Responsible Federal Budget (CRFB) pointed out shortly after Trump’s comments made headlines, “achieving this goal would be virtually impossible—particularly for a candidate who has proposed large tax cuts and ruled out significant entitlement reforms.”

Instead, the CRFB estimated that Trump’s proposals would cause the national debt to nearly double within 10 years. The group arrived at that figure by taking the existing baseline for the debt—which, as of early 2016, was expected to grow to about $28 trillion by 2026—and adding the estimated cost of Trump’s various campaign promises.

It’s worth appreciating how remarkably accurate that assessment turned out to be. The number-crunchers at the Congressional Budget Office and the CRFB didn’t know there would be a pandemic. They didn’t know the outcome of the major tax-and-spending bills that Trump and President Joe Biden would pass. Heck, they didn’t even know who would be president—remember, in April 2026, most of the political class didn’t believe Trump had much of a chance.

The accuracy of that prediction points to two things, Marc Goldwein, senior policy director at the CRFB, said when asked about it this week. First, the extent to which rising debt was baked into the federal budget before Trump came on the scene. Social Security and Medicare are the largest federal programs, and both were on pace to borrow more during the 2020s.

Second, it’s due to Trump keeping many of his campaign promises. That’s not the compliment that it might sound like. Trump vowed not to touch the aforementioned entitlement programs that were driving borrowing to new heights, and he promised to both cut taxes and increase military spending. That was a recipe for higher deficits, and over his first four years in office, Trump added over $8 trillion to the national debt that he’d once sought to “get rid of.”

Biden picked up where Trump left off, adding another $4.7 trillion to the debt with various proposals. In his first year back in the White House, Trump has done nothing to address the growing pile of debt. The federal government borrowed $1.8 trillion during the fiscal year that ended in September and is on pace to borrow about the same amount this year.

What have Americans gotten from a decade of heavy borrowing that doubled the size of the debt? Higher inflation and higher interest rates, for starters.

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The Treasury just declared the U.S. insolvent. The media missed it

The U.S. government is insolvent. That’s not hyperbole — it’s the conclusion drawn directly from the Treasury Department’s own consolidated financial statements for fiscal year 2025, released last week to near-total media silence. The numbers: $6.06 trillion in total assets against $47.78 trillion in total liabilities as of September 30, 2025.

Importantly, the $47.78 trillion in reported liabilities does not include the unfunded obligations of social insurance programs like Social Security and Medicare — those are disclosed separately in the off-balance-sheet Statement of Social Insurance (SOSI).

The government’s consolidated balance sheet position, excluding the SOSI, deteriorated by nearly $2.07 trillion between FY 2024 and FY 2025, reaching a staggering negative $41.72 trillion. Total liabilities are now nearly eight times the value of reported assets. The largest drivers were a $2 trillion increase in federal debt and interest payable (now $30.33 trillion) and a $438.8 billion increase in federal employee and veteran benefits payable (now $15.47 trillion).

The Off-Balance-Sheet Iceberg

The off-balance-sheet picture is even more alarming. The 75-year unfunded social insurance obligation surged by $10.1 trillion in a single year, rising from $78.3 trillion in FY 2024 to $88.4 trillion in FY 2025 — driven primarily by a $6.9 trillion jump in projected Medicare Part B shortfalls and a $2.5 trillion increase for Social Security. The Treasury’s Statement of Long-Term Fiscal Projections shows the 75-year fiscal gap widening from 4.3% of GDP in FY 2024 to 4.7% in FY 2025.

If the $88.4 trillion in 75-year off-balance-sheet obligations were added to the $47.8 trillion in official balance sheet liabilities, total federal obligations would now exceed $136.2 trillion — roughly five times U.S. annual GDP.

The Government Accountability Office (GAO) issued a disclaimer of opinion on the U.S. government’s FY 2025 financial statements — the 29th consecutive year it has been unable to determine whether the statements are fairly presented. This is primarily due to serious, ongoing financial management problems at the Department of Defense and weaknesses in accounting for interagency transactions.

What $136 Trillion Looks Like in Your Living Room

Not only has the financial press ignored the consolidated financial statements, but most members of Congress and members of the general public will not read the consolidated financial statements. Documents like the consolidated financial statements are not the kind of thing you want to read before driving. If that’s not bad enough, most people cannot relate to the trillion-dollar numbers in the financial statements. Therefore, it is appropriate to translate them into terms that people will understand.

Most people cannot relate to trillion-dollar figures on a government ledger. So consider this: divide every number by 100 million — drop eight zeros — and federal finances look like a household budget in freefall.

That household earns $52,446 and spends $73,378 — running a $20,932 annual deficit. Its total liabilities and unfunded promises amount to $1,361,788 against just $60,554 in assets, leaving it $1.3 million in the hole. Uncle Sam, by any accounting standard, is insolvent.

Congress has clearly lost control of the nation’s finances. America is facing a fiscal catastrophe. The reckoning, long deferred, is becoming impossible to ignore.

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AI Won’t Fix America’s Looming Debt Crisis

Last month, Congress sparred with the president over a partial budget, but with few real cuts, America’s slow march toward an epic debt crisis went on undeterred. With over $38 trillion in debt and interest payments exceeding defense or Medicare spending, one would expect lawmakers to confront reality and do the difficult work needed to restore fiscal sanity. But why would they? Cutting entitlements and increasing middle-class taxes rarely make for winning campaign slogans.

It’s no surprise, then, that some prefer to pin their hopes on AI as America’s fiscal savior. Vanguard’s chief economist Joe Davis argued there’s as high as a 50 percent chance AI will prevent a debt-driven economic malaise. Elon Musk voiced a similar conclusion late last year, claiming AI and robotics are “the only thing that’s going to solve the US debt crisis.”

The argument goes like this: an AI boom drives explosive economic growth and tax revenue, while, at the same time, productivity gains impressively offset any upward pressure on interest rates. The deficit becomes a surplus and the overall debt shrinks, possibly disappearing entirely.

If that sounds less like a policy plan and more like a retirement strategy built around winning the lottery, you’re not wrong. The entire scenario hinges on a massive if: that AI generates extraordinary revenue and does it quickly enough to outrun rising interest costs.

But even if the government hits the tax revenue jackpot before Congress drives us off a fiscal cliff, it would be naïve to assume lawmakers would pay down the debt. 

The More the Government Gets, the More the Government Spends

For the sake of argument, suppose the tech optimists are right, and the federal government enjoys a massive AI-driven revenue windfall. Understanding what happens next requires understanding the incentives of politicians and their voters.

This is where public choice shines. Rather than assuming politicians and voters act in everyone’s best interest, this branch of economics recognizes that people don’t become angels once they interface with the government. Incentives matter, especially for politicians.

Incentives are why we have a deficit in the first place. The public isn’t particularly interested in financial restraint because high spending and low taxes benefit them now, and the resulting debt is some future generation’s problem. Politicians surely see the crisis brewing, but solving it is a sure way to get voted out of office. And so the incentive is to run constant deficits and grow the debt year after year, decade after decade.

Without changing incentives, it will be hard to avoid spending new revenue. Ballooning coffers mean voters will demand that the government dole out more goodies (especially if AI displaces workers along the way). Washington already excels at entertaining expensive ideas: healthcare subsidies for well-off families, a universal basic income, generous tax cuts, a fifty-percent increase in military spending, all despite the pushback the current deficit’s able to muster. Imagine the wish list after it drops even a little.

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Chicago Claims Its Budget is Balanced. Independent Audit Shows a $41.1 Billion Deficit.

The city of Chicago exists on another plane of the universe than the rest of us. It’s a place where up is down, black is white, and the basic laws of physics are held in abeyance so that when adding one plus one, any number that’s convenient (and politically viable) can be the answer.

In Chicago’s budget, the “new physics” includes the caveat that nothing is real unless we (the aldermen and the city’s hapless Mayor Brandon Johnson) say it is. And even then, nothing is permanent in this alternate plane of the universe. An equation that’s “true” today may not be so “true” tomorrow.

Do you think I’m being facetious? 

“Chicago finished fiscal year 2024 with a $41.1 billion gap between the money it has available to pay bills and the obligations it owes, according to a new report from Truth in Accounting, placing the city among the worst financially managed major cities in the nation,” according to The Center Square.

That’s only half the story. The city denies there’s a deficit at all. City officials say (how can they not giggle when saying this) the budget is balanced.

Truth in Accounting CEO Sheila Weinberg clears up any ambiguity.

“They only include the expenses they’ve paid, not all the expenses they’ve incurred,” Weinberg said. “They also include loan proceeds as revenue and still claim the budget is balanced. In the real world, borrowing money to balance your budget would be insane. But in government budgeting, that’s how they do it.”

One person’s “insanity” is another’s denial of reality.

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“Train Wreck” US Adds $481 Billion In Debt In 3 Months

The government hit the debt ceiling back in January which blocked any net new debt from being created from January to June. Once the debt ceiling was lifted, the government wasted no time in catching up for all the months where borrowing was frozen. Over the last 7 months, the government borrowed an incredible $2.28T!

Note: Non-Marketable consists almost entirely of debt the government owes to itself (e.g., debt owed to Social Security or public retirement)

January was a very small month, but the chart below shows that $2.3T was borrowed for all of 2025. This follows $2.6T and $2.2T in 2023 and 2024. Needless to say, there seems to be a new standard of $2T+ annual borrowing. This will likely mean adding $10T every 4 years at current rates. More than likely that is going to accelerate going forward.

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China calls on banks to limit exposure to US debt – Bloomberg

China has urged its banks to curb their exposure to US government debt, citing market volatility and growing financial and geopolitical risks, Bloomberg has reported citing people familiar with the matter.

Over the past decade, China has steadily trimmed its US Treasury holdings, a shift that has seen it overtaken by Japan and the UK as the largest foreign holders of American debt. Since peaking at around $1.3 trillion in 2013, its holdings have fallen roughly by half to about $650–700 billion, reaching levels not seen since 2008.

Beijing has advised China’s major financial institutions to limit new purchases of US government bonds and reduce positions where exposure is high, according to sources who spoke to the outlet on Monday. The guidance reportedly does not apply to Beijingss’s official state holdings.

According to the report, which cited China’s State Administration of Foreign Exchange, Chinese banks held about $298 billion in dollar-denominated bonds as of September. It is unclear how much of that total consisted of US Treasuries.

The guidance, reportedly intended to diversify market risk, came ahead of last week’s phone call between Chinese President Xi Jinping and his US counterpart, Donald Trump. In October, the two leaders agreed to a one-year trade truce, under which tariffs and export controls on each other’s goods would be lowered.

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“Out Of Touch”: Marylanders Fume As Gov. Moore Prioritizes Building Energy-Hungry ‘Sphere’ Amid Power Bill Crisis

Marylanders are raging at left-wing Governor Wes Moore, accusing him of fast-tracking a massively power-hungry Sphere entertainment venue near Washington, DC, while working-class households across the central part of the state are drowning under crushing electricity bills.

“So this Governor spends money he doesn’t even have yet. 200 million dollars of the cost for the Sphere at National Harbor will come from the State of Maryland’s 2027 budget. He is so out of touch with what MD residents need and doesn’t care as long as his name is in the headlines every day,” Maryland resident Amy Milberger Seaman wrote in a Facebook group called “BGE Victims,” which has nearly 15,000 residents upset about exploding power bills.

Local media outlet WBAL-TV reported Monday that Sphere Entertainment plans to build its second U.S. Sphere venue in National Harbor, in Prince George’s County.

The Sphere will be slightly smaller than the one in Las Vegas, seating 6,000. Gov. Moore called the project the largest economic development project in the county’s history. The venue is expected to be funded through a mix of public and private financing, including $200 million in incentives from the state.

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Trump Administration Says Banks Will Soon Begin Distributing ‘Trump Cards’

A “Trump card” with an interest rate of 10 percent could be coming to Americans through banks that want to join President Donald Trump in lowering credit card rates.

Kevin Hassett, the director of the National Economic Council, said the concept of a one-year cap of 10 percent could be implemented voluntarily without needing to go through Congress.

“Our expectation is that it won’t necessarily require legislation, because there will be really great new Trump cards presented for folks that are voluntarily provided by the banks,” Hassett said on Fox Business.

“We’ve been in conversations with the big banks, with CEOs of many of the big banks who think that the president is on to something, that he’s got a great idea,” he said.

Banks “could potentially voluntarily provide for people who are in that sort of sweet spot — not having financial leverage very much because they don’t have access to credit, but they have enough income and stability in their lives that they’re worthy of credit,” Hassett said.

Trump kicked off the idea in a social media post earlier this month.

“Please be informed that we will no longer let the American Public be ‘ripped off’ by Credit Card Companies that are charging Interest Rates of 20 to 30%, and even more, which festered unimpeded during the Sleepy Joe Biden Administration,” Trump posted on Truth Social, adding “AFFORDABILITY!”

“Effective January 20, 2026, I, as President of the United States, am calling for a one year cap on Credit Card Interest Rates of 10%,” Trump posted.

“Coincidentally, the January 20th date will coincide with the one year anniversary of the historic and very successful Trump Administration. Thank you for your attention to this matter. MAKE AMERICA GREAT AGAIN! PRESIDENT DONALD J. TRUMP,” he wrote.

Trump pushed the interest rate cap along with banning large institutional investors from buying single-family homes and a push to have Fannie Mae and Freddie Mac buy $200 billion in mortgage bonds to lower mortgage rates, according to The Hill.

Banks panned Trump’s concept.

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