Noah Smith
· Noahpinion
· May 23, 2026 at 08:23
· ⏱ 6 min read
| Read on Substack ↗
Summary
Noah Smith argues that U.S. government debt is on an unsustainable path because rising interest rates are causing interest payments to explode, forcing the government to borrow more to cover those payments—a vicious cycle that risks spiraling inflation and fiscal crisis. The article is a call for bipartisan austerity, not a source of actionable trade ideas.
•U.S. national debt is above 100% of GDP, similar to post-WWII levels, but interest rates are nearly twice as high as they were after WWII.
•Government interest costs are exploding, and almost all the increase in the budget deficit since before the pandemic is due to higher interest payments.
•Trump's annual budget deficit as a share of GDP is about the same as Biden's, but the debt is now being rolled over at higher rates and inflation is no longer eroding the debt.
•The average maturity of U.S. debt is less than 6 years, so the higher rates from 2022 onward are increasingly hitting refinancing costs.
•The author expects neither rate cuts nor AI-fueled growth to resolve the debt spiral, and sees the only hope as bipartisan fear of deficits forcing austerity.