ANALYSISApril 13, 2026
Is federal deficit spending sustainable?
The Congressional Budget Office reported a $1.8 trillion federal budget deficit for fiscal year 2025, representing 5.9% of GDP, with federal debt held by the public reaching 99.8% of GDP. Net interest payments on the national debt surpassed $1 trillion for the first time in FY 2025. Congress passed the One Big Beautiful Bill Act in 2025, which CBO estimates will add $3.4 trillion to deficits over the next decade above baseline levels.
The US has run a deficit in all but a handful of years since 1970 — and the debt just crossed $34 trillion. Is this a slow-motion crisis that will eventually force a brutal reckoning, or is the 'we're going broke' alarm the same bad math that has been wrong for fifty years?
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Interest payments crowding out government capacity
C
Interest payments just crossed $1 trillion in a single year — not the deficit, interest alone — and that now exceeds what we spend on national defense. This money buys nothing: no roads, no research, no military readiness. Every dollar compounding on past borrowing is a dollar permanently unavailable for the actual functions of government.
L
We agree on the number and what it means — a trillion dollars annually producing nothing is a genuine crisis. But the question isn't whether this is bad; it's how we got here. The One Big Beautiful Bill Act just added $3.4 trillion more in deficit spending, $4.1 trillion with interest, while the interest clock is already running at rates that exceed economic growth. You can't simultaneously decry the interest burden and vote to enlarge it.
C
That's a fair indictment of the bill, and I won't defend it — a Republican Congress passing $3.4 trillion in new borrowing while interest payments consume defense-level revenue is indefensible by any serious conservative standard. But the origin of the fire doesn't change what happens if we don't put it out.
L
Agreed — and that's precisely why the solution has to include revenue, not just cuts. You can't close a structural gap this size by spending alone when the biggest drivers are tax cuts that never paid for themselves.
Dynamic scoring as deficit justification
C
The supply-side rebuttal — that growth effects will close the gap — has never been empirically validated at the magnitudes required. The TCJA added an estimated $1.5 to $1.9 trillion to the debt, and the promised growth acceleration never materialized at scale. The argument that tax cuts pay for themselves is not a theory awaiting confirmation; it is a theory with a two-decade track record of failure.
L
The conservative concession here is significant: you're acknowledging that dynamic scoring didn't work for the TCJA, didn't work for the Bush cuts before it, and yet the One Big Beautiful Bill Act was still passed and scored on optimistic growth assumptions. That's not a fiscal policy — that's faith-based accounting with a $4.1 trillion price tag.
C
Exactly right, and it should be said plainly: a conservative movement that demands spending be offset but exempts tax cuts from the same standard has abandoned the intellectual foundation of fiscal conservatism. Deficit spending is deficit spending regardless of which side of the ledger it originates on.
L
Then there's actually common ground here — the debate shouldn't be 'spending versus taxes' but 'what combination of both stabilizes the debt-to-GDP ratio without gutting the programs working Americans depend on.' That's a harder conversation than either side typically wants to have.
MMT safety valve has already closed
C
The MMT-adjacent argument that a currency-issuing sovereign faces no meaningful fiscal constraint always rested on one empirical condition: that interest rates stay below economic growth rates. That condition is now eroding. The Fed's rate hikes have snapped that relationship, which means the theoretical floor that deficit doves cited as their safety valve has dropped out from under them.
L
Granting the r > g point — when borrowing costs exceed growth, debt-to-GDP rises automatically even without new spending — that's an argument for urgency, not for the specific mix of cuts in the One Big Beautiful Bill Act. The r > g condition doesn't tell you to extend tax cuts for high earners while leaving trust fund solvency unaddressed; it tells you to stabilize the primary balance by whatever combination of revenue and spending gets you there fastest.
C
The r > g condition is neutral on *how* you close the gap — you're right about that — but it isn't neutral on *timing*. A productivity windfall that arrives in 2032 doesn't refinance a Social Security trust fund depleted in 2033. The math is asymmetric: waiting for the optimistic scenario to rescue you is a bet with catastrophic downside.
L
Which is exactly why uncertainty argues against adding $3.4 trillion now rather than for it — if we can't reliably project 2047, we also can't rely on growth assumptions to close a hole the CBO scores conventionally today, on an 8-to-11-year trust fund horizon that falls within any reasonable confidence interval.
Structural entitlement reform as the real test
C
Social Security and Medicare trust funds face depletion in 8 and 11 years respectively — not because of anything passed last year, but because Congress has refused for four decades to make adjustments the 1983 Reagan-O'Neill reforms proved are politically achievable. That deal raised the retirement age, adjusted benefits, and increased payroll taxes. It was hard. It worked. The current Congress passed a bill adding trillions instead.
L
The 1983 reforms are a genuine precedent, but notice what they actually were: a combination of benefit adjustments *and* revenue increases. Reagan didn't just cut benefits — he raised payroll taxes. If conservatives are citing 1983 as the model, that model includes new revenue, which is precisely what the One Big Beautiful Bill Act refuses to consider.
C
That's historically accurate and it's a point the current Republican majority should be forced to answer. Invoking Reagan on entitlement reform while opposing any revenue component is selectively citing the precedent.
L
The people most exposed to trust fund depletion are retirees who organized their entire financial lives around these programs existing — not abstractions, not future projections. A reform that asks them to absorb benefit cuts while high earners receive extended tax cuts isn't fiscal discipline; it's a choice about who bears the cost.
Whether uncertainty justifies more borrowing
C
Long-range projections carry real uncertainty — catastrophist fiscal predictions have been wrong before, and a sustained AI-driven productivity surge could meaningfully improve the debt trajectory. But the appropriate response to genuine uncertainty is not to bet the social contract on the optimistic scenario. Structural adjustments made now remain beneficial whether the productivity boom materializes or not; waiting for rescue that may not arrive forfeits the option value of acting early.
L
The uncertainty point cuts both ways, and you've correctly identified which way it cuts: if we can't reliably project 2047, we also can't rely on dynamic growth assumptions to justify $3.4 trillion in new borrowing scored conventionally by the CBO today. Uncertainty is a reason to preserve fiscal space — not to consume it on the chance that the best-case scenario arrives on schedule.
C
There's genuine agreement here, which makes the political reality more striking: both sides can articulate why uncertainty argues for caution, and both sides just watched Congress add trillions anyway. At some point the intellectual consensus among serious fiscal analysts on both sides has to translate into political consequence.
L
That translation is the whole problem — and it won't happen until voters are told plainly that the choice is between addressing this now, with some combination of revenue and reform that spreads the burden, or addressing it later under conditions where the only options left are severe.
Conservative's hardest question
The CBO's long-range projections — 172% to 200% of GDP by mid-century — depend on multi-decade assumptions about interest rates, healthcare cost inflation, and economic growth that carry enormous uncertainty; a sustained productivity surge from AI or other technology could meaningfully improve the debt-to-GDP trajectory, which is why catastrophist predictions about imminent fiscal collapse have been wrong before and may be wrong again.
Liberal's hardest question
The most serious challenge to my argument is that long-range fiscal projections — particularly 20-to-30-year debt-to-GDP scenarios — carry enormous uncertainty in their assumptions about growth rates, healthcare cost inflation, and interest rates, and have historically been revised substantially in both directions. If productivity growth accelerates meaningfully, perhaps through AI-driven gains, the fiscal math shifts in ways that could make current borrowing levels more sustainable than the CBO baseline suggests — and I cannot honestly dismiss that possibility.
Both sides agree: Both sides accept that the MMT-adjacent argument for deficit permissiveness has lost its empirical footing now that interest rates exceed economic growth rates, making the theoretical safety valve they once cited no longer operative.
The real conflict: They disagree on the primary diagnosis of the deficit's cause: the conservative framing treats structural entitlement growth as the central driver requiring reform, while the liberal framing treats revenue erosion from repeated tax cuts as the central driver — a factual dispute with distributional consequences about who bears the cost of adjustment.
What nobody has answered: If Social Security and Medicare trust funds are depleted within 8 to 11 years — a timeline well inside any reasonable confidence interval — and neither party has produced a politically viable plan to address them, what is the actual mechanism by which the fiscal path changes before the automatic benefit cuts that neither side will name become the de facto policy?
Sources
- Congressional Budget Office, Monthly Budget Review FY 2025 final release
- Congressional Budget Office, 10-Year Budget Outlook (updated 2026)
- Government Accountability Office (GAO), fiscal sustainability warnings and trust fund depletion projections
- Committee for a Responsible Federal Budget, One Big Beautiful Bill Act deficit analysis
- Stanford SIEPR economists' analysis of Trump administration trade and fiscal policies and debt sustainability
- Auerbach and Gale (NBER/CEPR), analysis of U.S. fiscal policy path
- CBO long-term budget outlook, 2054–2055 debt-to-GDP projections