The Implications of US Debt

May 4, 2017 The U.S. has more flexibility with its debt than many other countries have.

Deep Dive

|May 4, 2017

Summary

While the United States currently has a substantial debt, it does not face the risk of default due to insolvency. The U.S. is a unique country given its outsized military power and economic strength, which makes it difficult to draw conclusions about its debt based purely on economic analyses of other countries. However, the U.S. will experience consequences if its debt burden continues to grow.

Interest expense will grow as the debt grows, and interest expense has a more immediate impact on government finances than the total debt size.
There are several components to consider regarding both debt and the U.S. federal budget, some of which are easier to change than others.
There is an inverse relationship between interest expense and discretionary spending; since mandatory spending is politically difficult to change, increases in interest expense will put pressure on the discretionary budget – and, therefore, the defense budget.
The U.S. has greater flexib

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The Implications of US Debt