Clive Crook: America's broken politics are dragging it down a fiscal black hole

Few any longer dispute that America's public debt is growing unsustainably and that, sooner or later, the task of reining it in will be unavoidable. Oddly, this presumption of inevitability has bred a kind of complacency. In the end, whether we like it or not, the problem will have to be solved. Therefore, it will be solved. So what's the hurry?

The answer is that further delay makes an orderly solution harder to envisage. Eventually a point will come where a well-planned remedy is impossible, because the fiscal adjustments would crash the economy. At that point, the only remedy will be default, explicit or by means of high inflation. Americans need to take this disturbing prospect much more seriously. The problem is already so intractable - structurally intractable, you might say - that workable answers have become harder to imagine than outright fiscal collapse.

The headline numbers might be depressingly familiar - but take a look at Jessica Riedl's new fiscal chartbook, just published by the Brookings Institution, and consider the sheer scale of the task. The main forecasters expect U.S. budget deficits to run at roughly 6% of GDP for the foreseeable future. These estimates postulate full employment, no recessions, no major wars, no pandemics and "current law" (which assumes that some recent tax cuts and spending increases will expire) as opposed to "current policy" (which assumes they won't). Relax that last assumption and the deficits will be 7% of GDP or more.

Even under implausibly favorable conditions, public debt is on track to surpass its Second World War peak of 106% of GDP in another few years. By 2036, it will exceed that by a margin of 30 percentage points, and after that will keep rising.

Within a decade, so long as interest rates are no higher than now, debt service is set to absorb 30% of what the government collects in taxes; within another 20 years, more than half. If interest rates start to price in fears of fiscal stress, the debt's upward trajectory will accelerate, adding to those fears, raising interest rates some more and making the debt path steeper still - the classic vicious circle.

What will it take to escape this trap? Ideally, much faster economic growth. Conceivably, AI will dispense the miracle cure - but it's very unlikely. Faster growth in productivity thanks to AI will be required just to keep output expanding at 2% a year or so, given slower growth of the U.S. population and labor force. (Without immigration, the population will start to shrink within the next decade.) Many economists are skeptical about a big push from AI - but even if it happens, and it's enough to make up for worsening demographics, growth would have to be much higher than 2% a year merely to hold the debt ratio steady in good times, let alone cut it to restore fiscal resilience.

Which leaves higher taxes and/or lower public spending. But how likely is any such revival of fiscal discipline? The necessary changes would be extraordinarily demanding even if they were executed immediately, and Washington's current capacity to frame any such program is precisely nil.

As Riedl's charts explain, to hold federal debt at 100% of GDP, longer-term savings in the form of tax increases and/or spending cuts would have to run between 4% and 5% of GDP - equivalent to more than $2 trillion a year by the middle of the next decade.

Suppose the U.S. raised its income tax rates across the board by 10 percentage points: This would cut only about 3.5% of GDP from projected deficits. A European-style value-added tax of 20% - likewise inconceivable - would cut maybe 3% of GDP from future deficits. Taxing household incomes above $200,000 (single) and $400,000 (married) at 50% would yield about 1.5% of GDP in savings; a wealth tax like the one proposed by Senator Bernie Sanders another 0.6%. All these are "static" estimates, by the way, which assume heroically that much higher taxes wouldn't be partly self-defeating by suppressing growth.

The spending side is no easier. Two programs account for almost all of the actual and projected rise in deficits: Social Security and Medicare. Yet one thing that a supposedly polarized Washington has agreed upon is not to touch either category of spending. To accommodate their growth, other programs have been squeezed over time, but there's not much left to trim. In some cases, quite the opposite: Spending on defense will surely need to increase because of broken alliances and the deteriorating geopolitical environment.

Once you understand the scale of the problem, you see that an effective solution requires an equally unimaginable political transformation. Restoring fiscal control demands a comprehensive plan to combine all of the above - to raise taxes and cut entitlement spending substantially. These are highly unpopular policies that neither party is willing to contemplate. And the current political incapacity is deeply entrenched.

Today most of the country's politicians see compromise as defeat and deplore cross-party cooperation in principle. Contradictory priorities, refusal to share political pain and a determination to look away from the problem rule out stable long-term fiscal strategies. The country needs another Simpson-Bowles project, only bolder, with a commitment to follow through: Right now, the idea is laughable.

Sad to say, barring an AI miracle or a rebirth of functional politics, the likeliest outcome is therefore default - gradual, with higher inflation eroding the real value of federal debt, or sudden, with outright debt restructurings and all the attendant mayhem. Meantime, more of the same isn't going to cut it.

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This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Clive Crook is a Bloomberg Opinion columnist and member of the editorial board covering economics. Previously, he was deputy editor of the Economist and chief Washington commentator for the Financial Times.

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This story was originally published May 2, 2026 at 4:04 AM.