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He was once called Wall Street’s “Doctor Doom and Gloom.” Not everything has changed for Kent Smetters, who runs the budget model at Penn Wharton. Its economic outlook remains bleak, but impending doom is not around the corner.
From his point of view, destruction will reach America’s doorstep between 2045 and 2050, which is the breaking point for the American economy. This is the moment when, as Smetters argues, the cost of interest payments on the national debt becomes so great for the federal government that even large-scale tax increases can no longer reduce them.
At that point, Smetters says, the U.S. government will enter either an explicit or implicit default, both of which will have dire consequences. Outright default makes the United States a global defaulter. Implicit default occurs in theory through monetization of debt—leading to higher inflation—or by cuts in Social Security and Medicare payments.
“This is when the panic sets in,” Smetters told me. “This is the loss of trust in government.” “And that doomed other societies as well. Before us, you could go back to Rome, to France, to Spain, to the United Kingdom, to Germany. Almost every empire collapsed because of debt.”
Smetters is part of a familiar group of financial hawks moving in and out of Washington, which has all but resigned itself to a national debt that is ballooning in size with each passing day. Total US federal debt surpassed $38 trillion in October. By date From the Ministry of Treasury. In other words, total US debt has risen by $66,225 per second so far in 2025, According to Joint Economic Committee of Congress.
These are amazing numbers. But growing US debt is unlikely to be tamed anytime soon. President Donald Trump and the GOP-led Congress ignored concerns about fiscal discipline when they passed the so-called “Big Beautiful Bill” costing $3.4 trillion this summer.
“There is no credibility for either party.”
Handling her debts Appeared periodically As a priority in Congress. The most high-profile recent effort was the bipartisan Simpson-Bowles Commission in 2011. Lawmakers in both chambers met to reach an austerity deal that the country could live with. It did not take long for the austerity efforts to collapse, leading to automatic cuts in the following years. A striking resignation has crept in even among veterans of the spending battle.
“Frankly, neither side has any credibility on this issue anymore,” Virginia Democratic Sen. Mark Warner, who was on the Simpson-Bowles panel, told me two years ago. The US debt at the time amounted to $32 trillion, an inflated amount that he believed would “come back to bite us.”
Warner, a prominent Democratic centrist, said he has been likened to a “debt Cassandra” because he raised warnings about debt that fell on deaf ears. Cassandra was a character In Greek mythology, he made prophecies of impending disasters that no one believed.
Tragic tales and another $6 trillion in debt later, Smetters similarly acknowledged that there is a “boy who cries wolf” problem in constantly urging policymakers to restrict federal spending. The United States collects the bulk of its debt through spending on programs such as Social Security and Medicare.
Jason Furman, former chief economic adviser to President Barack Obama and now a professor at Harvard University, recently He noted on social media “Being an Anglo-Saxon country is not great for borrowing costs at the moment.” He published a chart showing ten-year US bond yields hovering at 4%, which is directly in the top five among developed countries. Greece has lower 10-year yields at 3.3%. This means that the Greek government is able to raise money through bonds on much better terms than the United States, which is a notable reversal of the market hierarchy.
In an interview, Foreman said the United States and the United Kingdom are in their own “toxic” bond due to unchecked spending habits.
Bond markets may be the last enforcement mechanism that forces national governments to change course. US bond yields rose after Trump introduced so-called reciprocal tariffs in April, prompting a temporary pullback. The president is still implementing it in almost every country four months later. This time, bond markets did not falter.
“I’m a little surprised,” Foreman told me. “I didn’t think this was what would happen to the bond markets.” One possible explanation for the muted reaction is investors’ confidence that the Fed will step in to the rescue by cutting interest rates to support growth, he said.
Even in the midst of massive economic uncertainty caused by stalling job growth and trade wars in every direction, US financial markets are unfazed. The Dow Jones Industrial Average and S&P 500 hit new records last week. This did not go unnoticed by Trump, who said Wednesday that he believes the stock market will continue to rise to new highs.
“In the meantime, they still believe the government will eventually get the reform done,” Smetters said of investors. “It all comes down to when [do] Have capital markets stopped believing that government will get its act together?