Government shutdowns are just the tip of the iceberg: The real problem in the USA is much bigger

More interest than military: America's debt is eating up the national budget

National debt has more than doubled in the last ten years, rising from $17 trillion in 2014 to $37 trillion in 2025. Simulations show that without targeted countermeasures, the American debt-to-GDP ratio could climb from its current 120 percent to over 170 percent within ten years. A sustainable solution requires a comprehensive compromise that demands painful concessions from both sides of the political spectrum: tax increases and a reform of major social programs.

An analysis of American national debt paints a picture of a nation on a fiscally unsustainable path. Debt exceeding $37 trillion and a debt-to-GDP ratio exceeding 120 percent are no longer merely abstract figures, but an acute burden manifested in exploding interest payments that are already crowding out crucial government investments in defense, infrastructure, and education.

The causes are multifaceted and deeply rooted in the political and economic developments of recent decades. A historically established pattern, in which debt was primarily incurred during wartime and reduced during peacetime, has given way to a new reality: a structural, permanent deficit. This is driven by a fundamental asymmetry between automatically increasing, legally mandated spending on social programs like Social Security and Medicare, and a revenue side that has been systematically weakened by repeated, politically motivated tax cuts under the administrations of both parties. External shocks such as the 2008 financial crisis and the COVID-19 pandemic acted as massive accelerants to this already precarious dynamic.

The consequences are serious. Interest payments have transformed from a passive consequence of debt into an active driver of future deficits, posing the risk of a self-reinforcing debt spiral. In the long term, lower economic growth, an erosion of living standards, and a weakening of the US's global leadership role are likely should confidence in the US dollar as the leading currency wane.

The greatest challenge, however, is political. The extreme polarization of the political system has paralyzed the capacity for compromise and leads to dysfunctional conflicts such as government shutdowns, in which the fundamental functioning of the state is misused as a political tool. A distorted public perception, fueled by misleading analogies and conflict-oriented media coverage, hinders a rational societal discourse on the necessary adjustments.

Although a wide range of fiscal solutions are available—from tax reforms and spending cuts to structural adjustments to social programs—each one is politically toxic. The analysis clearly shows that neither growth alone nor piecemeal spending cuts will suffice. A sustainable solution requires a comprehensive compromise that demands painful concessions from both sides of the political spectrum: tax increases and a reform of major social programs. As long as the political will for such an act of civic responsibility is lacking, the United States will continue to navigate a fiscal course that increasingly jeopardizes economic stability and the opportunities of future generations. The question is no longer whether action is needed, but when—and at what cost.

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The American budget crisis: A structural problem beyond partisan blame

The current government shutdown in the United States highlights a fundamental problem that extends far beyond day-to-day political disputes. With a national debt of $37 trillion and a debt-to-GDP ratio exceeding 120 percent, the US faces an unprecedented fiscal challenge. This situation demands a nuanced analysis that considers both current policy approaches and the historical failures of various administrations.

The scale of the American debt crisis

The shocking figures

The American national debt already surpassed the historic mark of $37 trillion in August 2025, significantly earlier than originally predicted. The Congressional Budget Office had forecast this threshold for 2030, but the COVID-19 pandemic and the subsequent massive government spending programs considerably accelerated this development. The debt-to-GDP ratio now stands at over 124 percent, a level historically only seen immediately after World War II.

These figures are not merely abstract statistics, but have concrete implications for the American economy and society. The interest burden on the US government is projected to reach $952 billion by 2025. Particularly alarming is the fact that these interest payments already exceed total defense spending, making them the second-largest expenditure item in the federal budget.

The interest rate spiral as a structural problem

The development of interest payments illustrates the structural nature of the American fiscal crisis. While $345 billion had to be spent on debt servicing in 2020, this amount had already risen to $659 billion by 2023. This trend will intensify further in the coming years: projections indicate that interest payments could reach $1.8 trillion by 2035.

Interest payments are projected to increase from 3.2 percent of gross domestic product in 2026 to 4.1 percent by 2035. As a share of federal revenue, interest payments will rise from approximately 18.4 percent at the end of 2025 to 22.2 percent by 2035. This means that nearly a quarter of all government revenue will have to be used for debt servicing alone, significantly restricting the government's ability to act in other important areas.

Historical perspective of government shutdowns

The history of shutdowns under different presidents

Government shutdowns are not a new phenomenon in American politics. Since 1976, there have been a total of 21 interruptions in government funding. Interestingly, these shutdowns are distributed among different presidents: Ronald Reagan experienced eight shutdowns during his term, all of which were relatively short, with the longest lasting only three days. Jimmy Carter had to manage five shutdowns during his single term in office.

Donald Trump, on the other hand, set the record for the longest shutdown in American history—35 days between December 2018 and January 2019—but not the most shutdowns overall. This longest shutdown cost the American economy at least $11 billion and resulted in approximately 800,000 federal employees being furloughed, while another 420,000 had to work without pay.

The costs of political gridlock

The economic impact of government shutdowns is substantial and extends beyond directly affected federal employees. The 35-day shutdown of 2018-2019 resulted in a permanent loss of approximately $3 billion in economic activity, which was never recovered. This was compounded by $3 billion in back pay for furloughed employees and $2 billion in lost tax revenue.

The societal costs are even harder to quantify: disruptions in food safety inspections, garbage accumulation in national parks, closure of federal museums, and delays in processing tax returns are just some of the direct impacts on the daily lives of American citizens.

The role of previous governments

Past failures

A critical look at the development of American national debt shows that the problem did not originate with the current administration. The debt has more than doubled in the last ten years, from $17 trillion in 2014 to $37 trillion in 2025. This development is the result of political decisions made by several administrations over an extended period.

The Obama administration did attempt to address the problem. In 2010, the Bipartisan National Commission on Fiscal Responsibility and Reform was established, chaired by Erskine Bowles and Alan Simpson. This commission aimed to develop bipartisan solutions to the fiscal challenges and bring the budget into primary balance by 2015. Although the commission produced constructive proposals, their implementation ultimately failed due to political opposition from both parties.

Structural deficits and political realities

The American budget problem has become a structural deficit, independent of economic fluctuations. Even without considering interest payments, the federal government spends more money than it takes in. This structural imbalance is further exacerbated by rising interest payments, leading to a vicious cycle of increased debt and rising interest costs.

Political reality shows that both Republicans and Democrats have historically tended to pursue their respective priorities without adequately considering the long-term fiscal consequences. Tax cuts were frequently implemented without corresponding spending reductions, while spending programs were expanded without sufficient funding.

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The current political strategy

DOGE and government efficiency

The Department of Government Efficiency (DOGE), established at the beginning of the second Trump administration, aims to achieve $1 trillion in savings through modernization of information technology, increased productivity, and reductions in unnecessary regulations and spending. Under the initial leadership of Elon Musk, systematic cuts were implemented across various government agencies.

DOGE's track record is mixed. While the initiative has indeed identified and partially eliminated inefficient structures, the actual savings are disputed. Critics argue that many of the claimed $140 billion in savings are based on flawed calculations and obfuscation. Furthermore, some agencies have rehired staff following the drastic cuts, calling into question the long-term effectiveness of the measures.

Economic psychology as a factor

The importance of economic psychology for economic success cannot be underestimated. The trust and confidence of the population and the markets play a crucial role in economic development. In this context, the determination to address structural problems can certainly have positive psychological effects, even if the specific methods are controversial.

At the same time, radical and ethically questionable approaches risk undermining trust in institutions. Balancing necessary reforms with preserving democratic stability represents one of the greatest challenges.

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International comparisons and evaluations

Debt ratios in a global context

With a debt-to-GDP ratio exceeding 120 percent, the US is significantly above the international average of 93.8 percent. This is particularly remarkable for a nation that enjoys special privileges as the issuer of the world's most important reserve currency. This special status allows the US to borrow at comparatively favorable rates, but this should not obscure the fact that even these privileges have their limits.

Simulations show that without targeted countermeasures, the American debt-to-GDP ratio could rise to over 170 percent within ten years. Even with moderate assumptions about deficit and interest rate developments, the ratio would exceed 150 percent. Such developments could shake the confidence of international markets and lead to capital outflows and rising risk premiums.

Long-term impacts and risks

The suppression of other priorities

Rising interest payments are already leading to a problematic displacement of other government priorities. Money that must be spent on interest payments is not available for investment in infrastructure, education, research, or social programs. These displacement effects will intensify in the coming years and increasingly restrict the American government's ability to act.

What is particularly problematic is that interest payments already exceeded both Medicare and defense spending in 2024. By 2035, they could approach the level of Social Security spending, the largest single item in the federal budget. This development fundamentally calls into question the priorities of American policy.

Demographic and structural challenges

Alongside the problems with high interest rates, the US faces demographic challenges that are putting additional strain on public finances. The aging population is leading to increased spending on Social Security and Medicare, while the working-age population is shrinking relatively. This demographic trend is exacerbating structural budget imbalances and making reforms even more urgent.

Possible solutions

Historical success stories

History shows that the US has been quite capable of successfully overcoming fiscal challenges. After World War II, it managed to reduce its then-high debt-to-GDP ratio to a sustainable level through a combination of economic growth and moderate debt reduction. Similar successes were achieved in the 1990s, when budget surpluses were even temporarily generated.

These historical successes were typically based on cross-party compromises that included both spending cuts and tax increases. However, the political willingness to make such compromises has significantly decreased in today's polarized political landscape.

The need for structural reforms

Sustainable long-term solutions require structural reforms on both the expenditure and revenue sides. This includes reforms to major transfer programs like Social Security and Medicare, which currently account for the largest portion of the federal budget. At the same time, tax reforms are needed that generate sufficient revenue without hindering economic growth.

Experience with fiscal commissions shows that cross-party bodies can indeed develop constructive solutions. However, the political will to implement these proposals is often limited, as the necessary measures require unpopular cuts in the short term.

The limits of radical approaches

Risks of drastic cuts

While criticism of the inefficiency of the American federal government is partly justified, drastic and rapid cuts carry significant risks. Experience with DOGE shows that radical cuts can have unintended consequences, including the disruption of critical government services and the weakening of institutional capacity.

Critics warn that DOGE cuts could ultimately cost more than they save if they eliminate revenue-positive functions, reduce crisis and risk management capabilities, and cut investment in science and research. A balanced approach that balances efficiency gains with preserving essential government functions would be more sustainable.

Democratic legitimacy and institutional stability

The way reforms are implemented is just as important to a democratic society as their content. Radical methods that circumvent or weaken democratic norms and procedures can ultimately cause more harm than the problems they claim to solve.

American democracy is based on a system of checks and balances, which, while sometimes leading to inefficiencies, also protects against authoritarian excesses. Reforms must respect and strengthen this system, not weaken it.

Why assigning blame won't solve the US budget crisis: Growth, discipline, reforms – The roadmap for America's financial rescue

The American fiscal crisis is a complex, structural problem that has developed over decades and cannot be attributed to a single administration or party. With a national debt of $37 trillion and annual interest payments already exceeding defense spending, the United States faces an unprecedented fiscal challenge that urgently needs to be addressed.

While criticism of previous governments for their shortcomings is justified, simply assigning blame is insufficient. What is needed are constructive, cross-party solutions that address both the expenditure and revenue sides of the federal budget. Past experience shows that such solutions are possible when the political will exists.

Current efforts to improve government efficiency are generally welcome, but must be carried out with prudence and in accordance with democratic principles. Radical approaches risk doing more harm than good, especially if they undermine institutional stability and trust in democratic institutions.

Ultimately, resolving the American fiscal crisis requires a long-term, strategic approach that looks beyond the next election cycle. Only through a combination of economic growth, structural reforms, and fiscal discipline can the US regain its financial stability and maintain its capacity to act in the face of future challenges. The time for half-measures is over—the scale of the problem demands decisive yet prudent action from all political forces.

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