National Debt A Growing Threat

US net interest payments on the national debt will likely exceed $1 trillion in fiscal year 2026. This marks 3.3% of GDP, the highest since at least World War II. Unlike the 1980s and 90s, when debt relative to GDP was similarly high but rates fell, current fiscal policy offers no clear path to reduced interest costs.

The article attributes higher long-term Treasury yields to this fiscal picture. Unlike prior periods, there's no "peace dividend" or significant spending restraint. Current entitlement spending is higher, and military spending cannot be easily reduced. This fiscal deterioration strains the ability to fund both deficits and private investment.

Watch for any signs of entitlement reform; without it, tax hikes become a likely outcome. The authors are concerned this debt burden is inexorably pushing toward a breaking point.