As of February 28, 2025, the United States’ national debt has reached a staggering $36.22 trillion, raising concerns about a potential debt crisis. Billionaire investor Ray Dalio has warned that without immediate deficit reduction, the U.S. could face a major debt crisis within the next three years.
The Severity of the U.S. Debt Crisis
The U.S. federal budget deficit rose to $1.8 trillion in the fiscal year ending September 30, 2024, marking the third-largest federal deficit in U.S. history. This surge has contributed to the national debt surpassing $36 trillion. The Congressional Budget Office (CBO) projects that net interest payments on this debt will total $952 billion in fiscal year 2025 and rise rapidly throughout the next decade, reaching $1.8 trillion by 2035. Over the next decade, net interest payments are expected to total $13.8 trillion. These escalating interest obligations could crowd out essential government programs, affecting millions of Americans.
Can Trump Avert This Crisis?
Former President Donald Trump’s fiscal policies, including significant tax cuts and increased defense spending, contributed to the rising deficit. The Tax Cuts and Jobs Act (TCJA) of 2017, for instance, reduced federal revenues while increasing the deficit. The CBO estimates that if the TCJA provisions are extended beyond their scheduled expiration in 2025 without offsetting measures, annual deficits will widen further. While tax cuts can stimulate economic growth, they also reduce government revenue, potentially exacerbating the deficit. Therefore, without significant policy shifts toward fiscal responsibility, it is unlikely that Trump could avert the looming debt crisis.
Could Trump’s Aggressive Actions Exacerbate the Crisis?
Aggressive fiscal policies, such as unfunded tax cuts and increased spending, can worsen the debt situation. The House of Representatives passed a budget framework aiming for $4.5 trillion in tax cuts and $2 trillion in spending cuts over the next decade, potentially increasing the deficit by $2.8 trillion. Such measures, without corresponding spending reductions or revenue increases, could accelerate the nation’s path toward a debt crisis.
Could China Have a Role to Play in This?
China holds approximately $859.4 billion in U.S. debt, making it one of the largest foreign creditors. While some fear that China could leverage its holdings to influence U.S. policy, this concern is often overstated. Selling off large amounts of U.S. debt could depreciate the dollar and harm China’s own economic interests, as it would reduce the value of their remaining holdings and make Chinese exports more expensive. Therefore, while China’s actions could impact U.S. debt markets, they are unlikely to be a primary driver of a U.S. debt crisis.
Global Resources
Trump’s focus on securing global resources, such as oil and minerals, often led to increased military spending and foreign interventions, contributing to higher deficits. For example, military operations in resource-rich regions require substantial funding, adding to the national debt. However, attributing the entire debt crisis to this focus would be an oversimplification, as domestic policies and economic conditions also play significant roles.
Escalating deficits
The United States faces a significant debt crisis, with projections indicating escalating deficits and interest payments. While former President Trump’s policies have influenced the fiscal landscape, averting the crisis requires comprehensive policy reforms focused on balancing revenues and expenditures. China’s role as a creditor is notable but not a primary factor in the debt dynamics. Addressing the crisis necessitates bipartisan efforts to implement sustainable fiscal policies that ensure long-term economic stability.
References
-
“National Debt of the United States,” Wikipedia,
-
“What Is the National Debt Costing Us?” Peter G. Peterson Foundation,
-
“How Much U.S. Debt Does China Own?” Investopedia,
-
“Deficits, Debt, and the Debt Limit in 2025,” Congressional Research Service,
-
“Which Countries Own the Most US Debt?” USAFacts,
-
“Waiting for a Large New Tax Cut? GLWT,” Financial Times,
-
“Is it a Risk for America that China Holds So Much U.S. Debt?” ChinaPower Project,
