What Happens If the US Just Keeps Borrowing?

Today I’ll cover a topic that seems to be on a lot of people’s minds: What is going to happen if the US government keeps borrowing more and more money?

It’s easy to see why people are concerned. The national debt is over $36 trillion. And literally every year since 2002, the US federal government has run budget deficits, meaning we spend more than we collect in taxes. That, in turn, means more borrowing. So what’s the endgame here?

Let’s break it down.

Borrowing itself is not necessarily bad. In fact, many governments borrow money just like households and businesses do. Borrowing can be a smart way to invest in things like infrastructure, research, or economic stimulus during recessions.

But the problem comes when borrowing becomes persistent and unsustainable — when we borrow not for investments, but just to keep up with routine expenses. That’s what’s been happening in the US.

One consequence of this persistent borrowing is that an increasing share of the federal budget has been going toward interest payments. In 2024, interest on the national debt cost over $1 trillion — more than the federal government spent on Medicaid, for example.

And as interest rates rise, this number will keep going up-even if we don’t increase the debt further-because the US generally rolls over debt that comes due by issuing new bonds.

So what are the consequences of continuing to borrow?

First, higher debt means more interest payments, which leaves less room for other spending-whether it’s defense, education, infrastructure, or safety net programs.

Second, persistent borrowing increases the risk that investors lose confidence in the US government’s ability or willingness to repay its debt. That could lead them to demand higher interest rates, making borrowing even more expensive.

Third, high government borrowing can crowd out private investment. When the government borrows heavily, it competes for funds in financial markets, which can push up interest rates and make it harder for businesses to invest and grow.

Fourth, if borrowing continues unchecked, it can reduce our ability to respond to future crises-like recessions, pandemics, or military threats. Investors may be less willing to lend to a government that’s in trouble if it’s already carrying a heavy debt burden.

Finally, even though the US borrows in its own currency-the dollar-and is unlikely to default in the near future, there are limits. Some people brush off the national debt by saying that we can just print the money, and I’ll have a separate video addressing that possibility. But the short takeaway is that printing money to pay off debt will cause inflation, which comes with its own serious costs. It will also make investors lose confidence in the US, making future borrowing more difficult and expensive.

What would it take to avoid these problems? The math is simple, even if the politics aren’t. We’d need to either raise taxes, cut spending, or (ideally) both. And the longer we wait, the more painful the necessary adjustments become and the more risk we run of a sudden debt crisis.

No one knows with certainty what level of national debt is crippling. It depends on many factors, including a country’s growth rates, political stability, and, ultimately, investor confidence. The US may be able to continue borrowing at reasonable rates for years or something may trigger a debt crisis next year. But we do know that the costs and risk grow with the size of the debt, and the longer we wait to change course, the riskier the US position becomes.

The bottom line is that debt doesn’t have to be a crisis — but it can become one if we ignore it for too long. Responsible borrowing can help support growth and stability. But permanent deficits and rising debt with no credible plan to address them? That’s a recipe for trouble.

Originally published at https://mytwocentsandcounting.substack.com.