The U.S. government is on a trajectory to a fiscal apocalypse in this century. Since fiscal 2001, the federal government’s annual planned expenditures have consistently exceeded expected revenues, with the shortfall covered by borrowing. As of fiscal 2025, total U.S. government debt amounted to $37.6 trillion, representing 124% of the GDP of $30.4 trillion. The annual interest paid on this debt in fiscal 2025 was $970 billion, or about 3.2% of GDP.There is a clear path to restructuring U.S. government financing for escaping the sovereign debt trap: (1) transform the federal debt into permanent capital and significantly reduce the debt servicing burden; (2) link revenues and expenditures to the size of the economy, and mandate zero-deficit federal budgets; and (3) establish a reserve fund to facilitate a smooth transition and ensure long-term financial resiliency.
OPINION: REPUBLICAN TAX CUTS MUST NOT BE BLAMED FOR RISING DEFICITS AND DEBT
President Donald Trump should propose converting all outstanding U.S. government debt at par into Perpetual Participation Certificates that would pay an annual participation amount equal to 1.25% of GDP for the most recent preceding fiscal year. If GDP grows in any subsequent fiscal year, the size of the participation payments for that year would increase, and, correspondingly, if nominal GDP declines, the size of the participation payments would decrease.
