The best way out of US debt spiral is robust economic growth

We have seen outsize investor focus on inflation and the Federal Reserve’s response to it. But while monetary policy gets most of the headlines, the much bigger long-term economic threat is our rapidly growing federal debt.

The deficit is around $2 trillion out of a $7 trillion federal budget (about 30% of spending!), which must be financed through Treasury issuance. Worse, more than half of the budget deficit reflects interest on debt. We have entered an unsustainable “compounding cycle” in which rising debt and interest rates produce ever-higher interest expense, requiring further borrowing.