Federal Reserve Chair Jerome Powell said on March 30 that while the United States’ $39 trillion national debt is not immediately unsustainable, its current trajectory ‘will not end well’ without policy changes, in remarks to students at Harvard University.
“The level of the debt is not unsustainable, but the path is not sustainable,” Powell said during a conversation with roughly 400 students. “It will not end well if we don’t do something fairly soon.”
His comments come after US national debt crossed $39 trillion on March 17, according to the Daily Treasury Statement, reaching the milestone less than five months after surpassing $38 trillion in October.
Debt level vs trajectory
Powell drew a distinction between the current stock of debt and its long-term direction, noting that the US retains advantages as the issuer of the world’s reserve currency and as home to deep capital markets.
Responding to a student question on the potential ‘breaking point’ of debt sustainability, Powell said there is no precise threshold, pointing to Japan’s higher debt-to-GDP ratio as an example. However, he said the trend in the US is clear.
“Federal government debt is growing substantially faster than our economy,” Powell said. “And that ratio is going up. And in the long run, that’s kind of the definition of unsustainable.”
Rising interest burden
Budget data shows the cost of servicing that debt is rising sharply. Net interest payments are projected to exceed $1 trillion in fiscal year 2026, according to estimates cited by US budget authorities, compared with $345 billion in 2020.
In the first three months of the current fiscal year alone, interest payments reached $270 billion, exceeding US defence spending over the same period.
Projections from the Congressional Budget Office show debt held by the public rising from about 101 percent of GDP today to 120 percent by 2036, surpassing levels last seen after World War II.
