Top Economist: National Debt Jeopardizes American Dream, Risks U.S. Depression
A prominent economist has cautioned that the nation’s debt is choking the American Dream, warning that if a much-discussed debt crisis materializes, the U.S. could confront a full-scale economic depression.
Numerous reasons have been cited for the demise of the American Dream. Recently, the focus has been on housing affordability, with President Trump acting to prevent major Wall Street investors from purchasing single-family homes. Similarly, JPMorgan CEO Jamie Dimon concurs that housing presents an obstacle, stating that more opportunities must be created.
At the same time, increasing expenses for retirement, child-rearing, and vehicle ownership have convinced many that attaining the high ideals of the American Dream is only possible with significant wealth.
Yet, according to a senior fiscal policy fellow at the thinktank Americans for Prosperity, many of these issues can be traced back to the enormous amount America owes its creditors. In the last quarter of 2025, the national debt reached a level that figures like Bridgewater Associates founder Ray Dalio have indicated is necessary to support economic prosperity.
During Congressional testimony last month, the economist informed lawmakers that the country is approaching a bond market reckoning with potentially severe outcomes for the public. The decisions made by their Congressional representatives, he stated, will decide whether the foundations of the American Dream—peace, freedom, and prosperity—endure, or if the nation faces a future of decline.
That future is already being obstructed, the author of ‘Fiscal Democracy in America’ explained in a phone interview. He noted that the affordability crisis, essentially another term for inflation, was primarily triggered by a dramatic “explosion” in the money supply at the start of the pandemic.
“We have already witnessed the inflationary effects of too much federal spending and debt,” said the economist, who formerly held government affairs roles at the Committee for a Responsible Federal Budget. “We have now reached a stage where, according to analyses from the Congressional Budget Office, World Bank, International Monetary Fund, and others, once the debt burden exceeds a specific percentage of GDP, it begins to hinder economic growth.”
The total debt amount does not necessarily alarm economists; indeed, government debt is a fundamental component of global markets. The greater concern is the debt-to-GDP ratio, which compares a country’s borrowing to its economic output. If this ratio becomes too skewed, growth can be stifled by the overwhelming funds required for interest payments.
“Consequently, there are fewer prospects,” the economist continued. “The existing opportunities do not offer as much compensation. Productivity is being held back.”
Is the worst-case scenario reality?
The most severe potential outcome is a debt crisis. This occurs when the U.S. fails to attract buyers for its debt, forcing it to either cut spending, accept higher interest rates to obtain loans, or dramatically expand the money supply to reduce repayment value—a move that leads to inflationary or hyper-inflationary consequences.
Under such circumstances, the economist contends, the “probability of a recession, or even a severe recession or depression, becomes possible.” He further noted: “Global economic instability could result in genuine security risks and even dangers to our political systems, influenced by the types of leaders desperate populations might support. These are all threats to the American dream originating from the escalating debt burden.”
Many analysts maintain that while the national debt is a concern, it will never escalate into an actual crisis. They argue that the U.S. is essentially too large to fail and possesses the inherent capability to prevent such a catastrophe.
Nevertheless, the economist asserts that while a recession is unavoidable (“they occur roughly every five years on average, so we will inevitably experience one”), America can still evade more severe outcomes if it “learns from past errors, both internationally and domestically, before reaching that point and changes course.”
A solution
There is no simple remedy for the government’s expenditure patterns. At least, not a politically popular one, and therefore not a measure elected officials will be eager to risk their careers to implement. As a result, the national debt problem is frequently characterized as a game of “chicken,” where each successive administration gambles that the next will be the one to handle the toxic issue.
Several choices exist to correct the imbalance, with spending reductions being the most unpopular. More generally, the federal government could implement a series of “fiscal rules” designed to balance the budget. Although a more agreeable alternative, this approach is also less potent: An Oxford Economics review of IMF data from over 120 nations shows an average improvement in the primary balance of 1.1% of GDP in the three years leading up to and including the adoption of a fiscal rule. However, this is followed by a decline of the same magnitude over the next two years.
The economist’s proposal is more straightforward: Transparency. The author is echoing the appeal made by Thomas Jefferson to his Treasury Secretary over two centuries ago: “We might hope to see the finances of the Union as clear and intelligible as a merchant’s books, so that every Member of Congress and every man of any mind in the Union should be able to comprehend them, to investigate abuses, and consequently to control them.”
“The most crucial step Congress could take, both to repair the budget and to revive democratic accountability within Congress, is to produce a genuine budget that includes all spending and revenue, providing complete visibility,” the economist said. “Every committee would oversee its respective area, enabling substantive debates about priorities, value assessments, essential actions, and areas for potential reduction.”