America does not look like a nation in fiscal distress—and that’s exactly the problem.
The S&P 500 has more than doubled in the past five years. Unemployment is at a multi-decade low. Social Security checks are going out.
But moments like these can hide deeper vulnerabilities. Rising tensions in the Middle East, including the conflict with Iran, are a reminder of how quickly economic conditions can shift. A disruption to global oil supplies could send energy prices higher, reigniting inflation and pushing interest rates upward. For a country already carrying more than $38 trillion in debt and spending more on interest than on national defense, that kind of shock would put even greater strain on federal finances.
And the underlying trend is already troubling. The national debt is on track to reach levels never seen outside of wartime—projected to climb to roughly 120% of GDP within the next decade. That means that the federal government would owe more than the entire annual output of the US economy.
That trajectory will not trigger an alarm bell overnight. As Ernest Hemingway wrote, bankruptcy happens “gradually and then suddenly.” The same can be true of fiscal decline.
