Report: America’s Debt Situation Will Soon Be Worse Than Right After World War II

The Federalist ^ | 07/17/2025 | Christopher Jacobs

[SeekAndFind]

Our country cannot get its fiscal house in order unless and until it starts slowing the explosion of Medicare spending.

The budget reconciliation measure Congress recently passed includes some important reforms designed to help reduce entitlement spending. But any realistic assessment of the nation’s fiscal position reinforces why Washington must go much further in reducing spending than the half-measures enacted in recent weeks.

In March, as lawmakers were beginning debate on the “big, beautiful bill,” the Congressional Budget Office released its annual version of the “Long-Term Budget Outlook,” which features economic and budgetary projections for the next three decades. The CBO report provides a clear look ahead to the debt crisis our nation faces if Washington does not soon get its fiscal house in order.

Debt Bomb Ahead

The first paragraph of the report’s first chapter makes clear the scope of the problem:

In CBO’s projections, federal debt held by the public rises in every year of the 2025-2055 period, reaches 156 percent of gross domestic product (GDP) in 2055, and remains on course to grow larger thereafter. In 2029, it climbs to 107 percent of GDP, exceeding the historical peak of 106 percent reached in 1946, immediately after World War II.

Think about that: Within four short years, the national debt will hit an all-time high as a share of the economy — and continue to rocket ever higher.

These “persistently large deficits,” in the range of 6-7 percent of GDP, mean prolonged and significant harm for the American economy, as CBO notes. The burden of the federal debt will raise interest rates and inflation, while Washington’s need to borrow so much money will crowd out private investment, slowing economic growth. Even without an immediate fiscal crisis — i.e., investors refusing to buy Treasury bonds, raising the risk of a default — economic stagnation will hurt working families across the country.

Unsustainable Entitlements 

Contra President Trump’s claims to “protect” Social Security and Medicare, the CBO report shows how those programs are effectively insolvent — and how failing to reform or change these unsustainable programs is making the entire federal government insolvent. By 2055, Social Security and health care entitlements (i.e., Medicare, Medicaid, and Obamacare) will go from comprising 55 percent of noninterest federal spending this year to consuming two-thirds of the federal budget:

Image CreditCongressional Budget Office

CBO also notes that “growth in spending on Medicare is projected to account for more than 90 percent of the increase in spending on the major health care programs over the next 30 years,” due in part to the retirement of the baby boom generation. In other words, our country cannot get its fiscal house in order unless and until it starts slowing the explosion of Medicare spending.

Could Get Worse

As bleak as the March CBO report looked, the country’s financial situation could — and quite probably will — get worse. For starters, in March, CBO increased its 30-year revenue projections and slightly reduced its Medicare spending projections compared to last year’s version of the long-term budget outlook. Those changes mean that the federal government faces a debt bomb of “only” 154 percent of GDP three decades from now, as opposed to 166 percent of the economy in last year’s edition.

The “big, beautiful” bill will likely change the situation for the worse. While some of the tax reductions in the bill will generate economic growth, and therefore more federal revenue from said growth, the tax cuts likely will not fully “pay for themselves,” as both the March CBO report and an analysis from Sen. Ron Johnson, R-Wis., explained.

Moreover, because some of the tax cuts in the just-passed measure will expire in future years, lawmakers will face pressure to extend them — and extend them by growing the national debt. It’s fairly easy to envision a scenario whereby lawmakers of both parties decide to extend those tax cuts, and even undo some of the spending reductions included in this month’s measure. That’s how Congress has operated for years, as a version of “Oprah ’s Favorite Things” where “You get a car! You get a car! You get a car! Everybody gets a car!”

But eventually, the bill will come due. CBO’s report serves as another warning bell that that day is getting ever closer and that the consequences will not be pretty once our nation’s debt bomb finally detonates.

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Chris Jacobs is founder and CEO of Juniper Research Group and author of the book "The Case Against Single Payer."

[Bobbyvotes]

Excessive debt is the main reason for demise of historical superpowers, kingdoms, Third Reich, individuals, Corporations,
countries.

[Jonty30]

Socialized healthcare can never work, because people are greedy.

The only way to make it work is to change medicare over to an HSA, where you contribute to your own care.

[chud]

https://wtfhappenedin1971.com/

[PGR88]

Socialized healthcare can never work, because people are greedy.

Americas present bloated, government-controlled, crony-capitalist health care system can not be changed. It has too many dependents, both in terms of supply and demand.

What can be done is allow a completely free and unregulated health-care system to arise beside it. Basically a concept of medical "free trade zones" where state and federal rules and support do not apply, taxes and regulation are eliminated.

[jonrick46]

The US has generated $100.5 billion this year from tariffs as of July 13, the latest data available — 111.5% more than the same time last year. Federal income taxes, meanwhile, brought in $2.4 trillion in 2024. The US debt is melting away.

[Captain Peter Blood]

Far from melting away. We run a $2 Trillion deficit on Health Care Spending, money we have to borrow. Interest on the Debt is already over $1 Trillion.

Countries are moving away from buying our Debt which leaves the Fed as the buyer of last resort. So will their Balance sheet start to expand again with no end?

BRICS and other countries are moving to a new payments system and away from the Dollar, i.e. they are slowly dumping dollar investments.

Just this week a big Asian Investment form pulled $52 Billion from Blackrock to invest elsewhere. We, the U.S., are going to be left out of the new multipolar world unless we realize it’s time to pivot.

[Captain Peter Blood]

It’s not Medicare spending that is out of control, it is Medicaid spending that is crippling us. Of course we can solve the problem by raising the Medicare Texes to $7000 a person, who wants to do that?

[rdcbn1]

Entitlement spending is destroying America.

President Trump is doing everything possible to get our spending and deficits under control and what he has achieved so far is amazing.

His strategy is very sophisticated and it involves generating rapid economic growth to simultaneously generate tax revenues while weaning people off the welfare system by putting them back into the workforce voluntarily, at least at first.

This makes the welfare cuts politically much easier and it also provides a firm economic foundation to do so.

Welfare has become so pervasive that it is a lielfstye for many. If we cut ever person on welfare off could turkey right now, the economy would collapse and we would have a crime driven civil war on our hands.

Trump Administrations people have also figured out that many entitlement recipients are receiving their benefits illegally via fraud or they are ineligible - especially legal and illegal immigrants Rather than have Congress pass massive entitlement cuts via legislative mandate, the Trump people have figured out that the first wave of spending cuts has to come from cutting off the people who should not be getting payments in the first place and who can be removed by politically popular executive action.

Immigrants spend 650 billion dollars a year on remittances to family members living in their home countries.

Virtually all of these immigrants are on welfare of one form or another, since cash is fungible,the American taxpayer is subsidizing the funding of these remittances.

It's insane that American taxpayers are having a huge problem generating enough income to float their families while (mostly illegal) immigrants seem to have more than enough money to send $500-$1000 a month to their families living abroad.

President Trump is getting this under control as well.

One very important thing that this article neglects to point out is the United States is not alone when it comes to an impending debt crisis.

In fact, most all First World nations are in the same boat and their economies are being propped up one way or another by US deficit spending so when the US economy takes a hit, our international partners are going to have their economies hammered much worse by the US down turn which will result in a supply chain meltdown that makes Covid look tame by comparison.

The Trump Administration realizes this and it is working frantically to re shore mission critical industries back to the United States so the US regains a self sufficient industrial base capable of going it alone without dependence on foreign imports (especially from our main adversary, China) in the event of a global supply chain breakdown due to war or economic disruption .

One of China's most successful military strategies has been the systematic intentional destruction of the United States mission critical defense industrial base by strategic economic warfare. Both Covid and the wars in Ukraine and the Middle East have highlighted this weakness and the Trump Administration is working overtime to rebuild our domestic industrial base..

[alexander_busek]

Excessive debt is the main reason for demise of historical superpowers, kingdoms, Third Reich, individuals, Corporations, countries

The demise of the Third Reich was due chiefly to geographic overreach and the concomitant collapse of logistics. Further: To insufficient oil supply (which they couldn't have purchased and shipped even had they had the funds - and there were still hoards of Nazi gold bunkered all over the country at the close of WWII).

The decimation of air power resulting from the ill-advised "Battle of Britain," the failure of Fall Blau, and a little thing called "D-Day" may have also contributed to it.

Insistent, frustrated, or disillusioned creditors did not bring the Third Reich to fall.

Regards,

[jmaroneps37]

And soon after will start to shrink because of Trump’s abilities to handle finances and tariffs so your point is?

[mewzilla]

Thanks to baseline budgeting, it’s ALL of it.

We need to end the use of baseline budgeting.

[central_va]

Article is bunk. Tax cuts INCREASE revenue.

[central_va]

Article is trash and does not take into account tariff revenue , foreign investment and economic growth from repatriation of manufacturing.

[central_va]

I am recently on Medicare. I paid a lot out of pocket more than I expected. It is catastrophic insurance now.

[yldstrk]

Socialized healthcare can never work, because people are greedy.
******
Seems like healthcare would be naturally limited by people’s health, not by greed. If people had healthy foods and drinks, no smoking and very little drugging and drinking, sickness would get better and injuries would be what were focused on.

[DIRTYSECRET]

America was deep in debt when Hamilton talked Jefferson into buying Louisiana. Perhaps Trump has the same thing in mind with all the investments he’s bringing in. Hopefully Greenland is in the mix.

[Alberta's Child]

Article is trash and does not take into account tariff revenue , foreign investment and economic growth from repatriation of manufacturing.

Please quantify these.

$37T of federal debt has a staggering cost as interest rates have risen since 2021. At a 4% rate on U.S. government debt (a reasonable scenario, as 20- and 30- year rates have been above 5% for most of this week), we are looking at nearly $1.5T in annual interest payments.