NDR: Debt concerns remain persistent

Despite widespread concerns about the U.S. fiscal outlook, the key issue is not the size of the debt itself but whether it can be financed without disrupting economic growth. With budget deficits projected to keep widening and federal debt continuing to climb as a share of GDP, net interest costs have become the government's third-largest expense and are expected to rise further. 

While Treasury Secretary Scott Bessent's recent bond market intervention underscored concerns about growing debt burdens, debt remains manageable as long as bond yields stay below nominal GDP growth. However, a continued increase in borrowing could eventually push up bond yields, crowd out private investment, and tighten financial conditions. The Congressional Budget Office projects annual budget deficits will rise from nearly $1.9 trillion in fiscal 2026 to more than $3 trillion by 2036, with deficits potentially growing even larger if temporary tax cuts are extended without offsetting revenue measures (chart above). Download the full publication by completing the form to the right.

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