US Rising Debt Crisis Deepens as Federal Debt Crosses $37 Trillion
24th February 2026, Kathmandu
The global financial community is closely monitoring the escalating fiscal challenges in the United States as the federal debt has officially surpassed the 37 trillion dollar mark. This historic level of indebtedness comes at a time when the American economy is grappling with the dual pressures of persistent inflation and high interest rates. The rapid expansion of government borrowing is not a sudden phenomenon but the culmination of decades of deficit spending, where the federal government has consistently spent more than it has collected in revenue. As the debt to GDP ratio continues to climb, economists are raising urgent questions about the long term sustainability of the American fiscal model and its implications for the global reserve status of the US dollar.
US Rising Debt Crisis
A primary driver of this fiscal strain is the record level of spending on social safety nets. Spending on Social Security programs for senior citizens has reached an unprecedented 9.4 percent of the Gross Domestic Product (GDP). To understand the magnitude of this shift, one must look at the historical data from the 1980s, when such spending stood at approximately 6 percent of GDP. This represents an increase of nearly 56 percent over four decades. Projections from non partisan budget offices suggest that if structural reforms are not implemented, this figure could rise to 11 percent of GDP within the next ten years. The root cause of this trend is demographic in nature, as the massive baby boomer generation enters retirement, significantly increasing the number of beneficiaries relative to the active workforce.
The crisis is further exacerbated by the rising costs of healthcare. As life expectancy in the United States has risen to nearly 80 years, the federal government is committed to providing Medicare and other healthcare benefits for much longer periods than originally anticipated. Healthcare inflation has historically outpaced general inflation, driven by advancements in medical technology, rising pharmaceutical prices, and the high costs associated with managing chronic diseases in an aging population. These government supported medical programs are now among the largest and fastest growing components of the federal budget. Without a significant overhaul of healthcare delivery or pricing, these expenses will continue to consume a larger share of the national income, leaving less room for discretionary spending on education, infrastructure, or defense.
Another critical factor in the current debt trajectory is the mounting cost of interest payments. As the total debt grows, the cost of servicing that debt becomes a significant budgetary item itself. In an environment of higher interest rates, the US Treasury must offer higher yields on government bonds to attract investors. This creates a feedback loop where the government must borrow more just to pay the interest on previous borrowings. Interest payments are now on track to exceed the total spending on national defense, marking a significant shift in the federal spending priority. This phenomenon reduces the fiscal flexibility of the government, making it harder to respond to future economic downturns or national emergencies without further destabilizing the budget.
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The political and legal landscape is also adding complexity to the fiscal outlook. Recently, the US Supreme Court declared certain tariffs imposed during the previous administration to be unlawful. These tariffs had served as a significant revenue stream, contributing to a temporary narrowing of the budget deficit. For instance, in January 2026, the budget deficit declined by 26 percent year over year to 95 billion dollars. During the first four months of the 2026 fiscal year, the federal deficit fell by 17 percent compared to the previous year, reaching 697 billion dollars. However, the invalidation of these tariff measures threatens to reduce future revenue, potentially worsening the fiscal imbalance just as social security and healthcare costs are peaking.
The most alarming projection concerns the solvency of Social Security benefits. Analysts warn that if the current mismatch between revenue and expenditures is not addressed by 2032, the Social Security Trust Fund may be depleted. This does not mean benefits would disappear entirely, but it could lead to an automatic reduction in the amount paid to beneficiaries. Such a scenario would have a devastating impact on millions of seniors who rely on these payments as their primary source of income. To avoid this, policymakers are faced with difficult choices: they must either increase taxes to boost revenue, adjust the retirement age to reflect higher life expectancy, or implement means testing for high income beneficiaries to control spending.
Macroeconomic consequences of the 37 trillion dollar debt are already being felt in the financial markets. High debt to GDP ratios can lead to the crowding out of private investment, as government borrowing competes with the private sector for capital. This can lead to higher borrowing costs for businesses and consumers, potentially stifling long term economic growth. Furthermore, sustained fiscal imbalances can put pressure on the credit rating of the United States, as seen in previous downgrades by major rating agencies. Financial markets closely monitor these metrics, and any perceived lack of political will to address the debt could influence bond yields, currency valuation, and overall global investor confidence in American assets.
In conclusion, the United States is at a fiscal crossroads with a national debt exceeding 37 trillion dollars. The combination of an aging population, escalating healthcare costs, and the rising burden of interest payments has created a structural deficit that cannot be ignored. While short term improvements in deficit figures have provided some breathing room, the long term risks to the Social Security system and overall economic stability remain elevated. Addressing this crisis will require a comprehensive approach involving tax reform, entitlement restructuring, and a commitment to promoting sustainable economic growth. Without such interventions, the next decade will likely be defined by the difficult task of balancing the promises made to senior citizens with the fiscal realities of a heavily indebted nation.
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