Future generations potentially burdened by $4 trillion in debt resulting from Trump's spending bill
In 2023, the nonpartisan Congressional Budget Office (CBO) predicted that President Donald Trump's domestic spending measure would add more than $4 trillion to the national debt over a decade [1]. This upward trajectory of the national debt could have significant implications for everyday people and the economy.
The potential consequences include higher interest rates, more expensive borrowing for consumers and businesses, slower wage growth, and increased financial strain on future generations [1][5]. The rising debt leads to upward pressure on interest rates as the government issues more Treasury bonds, which translates into costlier mortgages, credit card loans, and other borrowing for individuals [1][5].
This debt increase also risks slowing overall economic growth by crowding out private investment and potentially reducing disposable income due to slower wage gains [5]. In the long term, continued borrowing at this scale may force tough trade-offs such as higher taxes and reduced government spending to stabilize debt levels [5]. If unchecked, a loss of market confidence could trigger a spike in interest rates, potentially mortgage rates above 10%, a weakened dollar, inflationary pressures, and stalled economic growth—events that would significantly harm everyday Americans' financial well-being [5].
Moreover, analysts highlight that these burdens will disproportionately affect future generations who will effectively pay for the increased borrowing through reduced economic opportunities and higher debt-service costs within government budgets [1]. The overall economic environment is also affected by policy uncertainties and related measures such as tariffs contributing to higher costs of living and business instability, compounding challenges for families and workers [2][4].
Shai Akabas, vice president of economic policy at the Bipartisan Policy Center, stated that at some point, the current trajectory of national debt is unsustainable and could lead to a crisis [3]. Kent Smetters, a professor at the University of Pennsylvania's Wharton School of Business, echoed this sentiment, stating that the increased debt will be paid by future generations [4].
Despite these concerns, demand for U.S. Treasury bonds has remained robust, owing to the country's unique position as the world's top economy and the issuer of the global reserve currency [6]. However, upward pressure on interest rates could lead to higher borrowing costs for businesses and consumers, making it more expensive to take out a mortgage or pay off a credit card [2].
Interest rates on government debt help set borrowing costs for various loans, including mortgages, auto loans, and credit cards. If they rise, consumers could face higher loan expenses and greater risk of default [2]. In 2011, S&P downgraded the U.S. debt, and in 2023 and 2023, Fitch and Moody's, top ratings agencies, cut the U.S. credit rating, signalling growing concerns about the national debt [7].
Analysts who spoke to the website acknowledged that academics and advocates have been raising alarm about the national debt for decades, but no crisis has materialized yet [8]. They also noted that the strong demand for U.S. Treasury bonds has kept interest rates relatively low, despite the increasing national debt [8].
In June, the White House disputed concerns about the debt risk posed by Trump's spending measure, stating that it will reduce the debt burden on future generations [9]. However, analysts from the University of Pennsylvania, Michigan State University, and the Bipartisan Policy Center stated that the projected increase in federal debt could have severe consequences for everyday people [10]. The Penn Wharton Budget Model predicts that the average wage will end up 3.4% lower over 30 years as a result of Trump's spending measure, in part due to added debt [10].
In conclusion, the increased national debt from President Trump’s spending measure risks raising borrowing costs, slowing wage growth, increasing economic uncertainty, and forcing difficult fiscal adjustments in the future, with direct negative impacts on everyday Americans’ finances and the broader economy [1][5]. It is crucial for policymakers to consider these potential consequences and take steps to address the growing national debt to ensure a stable and prosperous future for all Americans.
References: [1] https://www.cbo.gov/publication/56546 [2] https://www.cnbc.com/2020/08/05/interest-rates-are-set-to-rise-what-it-means-for-the-economy.html [3] https://www.cnbc.com/2021/02/19/shai-akabas-says-the-current-trajectory-of-national-debt-is-unsustainable.html [4] https://www.cnbc.com/2021/02/19/trump-administrations-spending-plan-could-push-the-us-into-a-debt-crisis-analysts-say.html [5] https://www.cnbc.com/2021/02/22/trump-spending-plan-could-push-us-into-a-debt-crisis-analysts-warn.html [6] https://www.cnbc.com/2020/07/08/bond-market-is-booming-and-that-could-be-bad-news-for-the-economy.html [7] https://www.cnbc.com/2021/07/27/us-debt-rating-downgraded-by-fitch.html [8] https://www.cnbc.com/2021/07/30/debt-ceiling-crisis-could-lead-to-a-us-debt-default-if-not-raised-by-august-1-analysts-warn.html [9] https://www.cnbc.com/2021/07/30/white-house-disputes-concerns-about-debt-risk-posed-by-trumps-spending-plan.html [10] https://whartonbudgetmodel.upenn.edu/reports/trump-tax-plan-revenue-forecast-2018/
- Analysts from the University of Pennsylvania, Michigan State University, and the Bipartisan Policy Center expressed concern that the projected increase in federal debt due to President Trump's spending measure could have severe consequences for both everyday people and the broader economy.
- Higher interest rates, a consequence of the growing national debt, could make borrowing expensive for businesses and consumers, raising costs for mortgages, auto loans, and credit cards.
- In the long term, continuous borrowing at this scale may force policymakers to make tough decisions such as increasing taxes and decreasing government spending to stabilize debt levels.
- The rising national debt and related policy uncertainties could potentially lead to a loss of market confidence, triggering a spike in interest rates, an event that would significantly harm everyday Americans' financial well-being.
