Government Debt & Fiscal Policy
Current trend: escalating · Category: Politics · Last updated: July 24, 2026
Current situation
Deficits remain historically large while interest payments consume a growing share of federal spending. As some major foreign governments pull back from buying U.S. government securities, there is an increasing reliance on domestic investors. Longer-term Treasury securities have struggled, meaning interest rates have stayed stubbornly high. The result is higher borrowing costs for consumers and businesses.
Why we're watching
Federal deficits and rising interest costs shape taxes, inflation, borrowing costs, and government spending priorities. If investors lose confidence in the U.S. paying back its debts, it would result in consistently higher interest rates.
What to watch for next
Major tax legislation, Debt ceiling agreement, Treasury funding stress, Sharp increase in interest costs
Signal history
- 2026-07-24 — Developed market debt to hit record $75.8 trillion as shocks and spending pressures mount Fitch forecast the U.S. would record the largest government budget deficit among major developed economies this as the global financial crisis, the euro zone debt crisis, the COVID-19 pandemic, Russia's invasion of Ukraine and the ongoing U.S.-Iran conflict, had all contributed to a long-term ratcheting up of debt.
- 2026-07-17 — Interest on the National Debt Now Costs More Than Medicare Net interest surged to $1 trillion. Growing deficits mean more Treasury issuance, which generally pushes yields up and pressures bond prices and equity valuations. Heavy interest costs leave less room for fiscal stimulus in downturns.
- 2026-07-16 — Treasury borrowing projections revised higher as deficits remain elevated. Could cause selling of Treasury securities, increasing interest rates
Related briefings
- The US is buying the yen in bulk (2026-08-07)