America’s $38 trillion debt crisis is already here. The reckoning comes next

The S&P 500 has more than doubled in the past five years. Unemployment is at a multi-decade low. Social Security checks are going out.

But moments like these can hide deeper vulnerabilities. Rising tensions in the Middle East, including the conflict with Iran, are a reminder of how quickly economic conditions can shift. A disruption to global oil supplies could send energy prices higher, reigniting inflation and pushing interest rates upward. For a country already carrying more than $38 trillion in debt and spending more on interest than on national defense, that kind of shock would put even greater strain on federal finances.

And the underlying trend is already troubling. The national debt is on track to reach levels never seen outside of wartime—projected to climb to roughly 120% of GDP within the next decade. That means that the federal government would owe more than the entire annual output of the US economy.

That trajectory will not trigger an alarm bell overnight. As Ernest Hemingway wrote, bankruptcy happens “gradually and then suddenly.” The same can be true of fiscal decline.

A bipartisan fiscal commission offers a structured, credible forum for lawmakers to put everything on the table and produce a package of reforms capable of stabilizing the nation’s finances before gradual erosion becomes genuine crisis.

The US has over $38 trillion of national debt. We now spend more annually on interest than on the military. The primary trust funds for Social Security and Medicare are also projected to become insolvent within the next seven years, requiring an automatic benefit cut or even more deficit spending to backfill these programs. These pressures will intensify as the population ages, health care costs rise, and economic growth slows.

For American businesses, the looming debt crisis carries tangible, real-world consequences. High levels of government debt require the federal government to spend more on interest payments, leaving fewer resources available for infrastructure, education, national defense, and social programs. If investors begin to view US debt as riskier, interest rates could rise further, increasing borrowing costs for expansion, hiring, and investment.

The U.K. offered a preview. In 2022, Prime Minister Liz Truss announced some of the largest tax cuts in decades primarily financed via deficit spending, financial markets were rattled, causing precipitous declines in the value of the pound and threatening the solvency of British pension funds. Within weeks, the prime minister and the country’s finance head were forced to resign. The U.S. economy is larger and the dollar holds reserve currency status—but the dynamic of confidence lost suddenly after building gradually is the same.

Establishing a bipartisan fiscal commission in Congress to address the debt crisis would not solve the problem overnight, but it could break partisan logjams, focus both political parties on finding a solution, bring bipartisan credibility to reforms, and encourage public awareness and support. It would bring bipartisan credibility to reforms and build the public mandate needed for Congress to act.

The commission’s three primary strategic objectives should be to improve the long-term fiscal condition of the federal government, hold the expected debt-to-GDP ratio to a more sustainable level (such as 100%), and address the long-term solvency of the Social Security and Medicare Trust Funds.

For a commission to be successful, everything must be on the table. The commission should undertake a top-to-bottom review of all federal spending and revenue sources. To avoid losing political momentum, the law establishing the commission should include strict timelines and commitments for votes on the House and Senate floor. Following enactment, Congress should adopt strong enforcement mechanisms for future fiscal decisions to avoid altering the new fiscal trajectory.

The American people must understand the stakes. A public education campaign should explain the fiscal crisis, invite broad input, and build the political will needed for Congress to act. This effort should focus especially on groups most vulnerable to a debt crisis—younger generations, low-income communities, and the “sandwich” generation.

The U.S. debt crisis is already here. Forming a bipartisan fiscal commission is an immediate first step in developing a comprehensive plan to address the national debt and forcing action in Congress. Only then can we preserve our national prosperity for future generations.

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