37 trillion reasons to have a Plan B

On Friday afternoon last week, the US national debt hit another ignominious milestone: $37 trillion. And there’s absolutely no end in sight.

Perhaps the wildest part is how quickly the debt is rising. Just before the One Big Beautiful Bill was passed on July 4th– barely a month ago– the national debt was ‘only’ $36.2 trillion. So, the debt increased a whopping $800 billion in a mere 36 days.

To be fair, about $300 billion worth of that amount was ‘pent up’ debt that couldn’t be reflected on the national balance sheet until they increased the debt ceiling last month.

But there’s still roughly half a trillion dollars in fresh spending that went out the door over a five-week period. That is an insane pace of outflows.

The other big problem, of course, is that the debt is becoming a lot more expensive– in other words, the average rate of interest that the US government pays on the national debt is steadily rising.

As of July 31st, 2025, Uncle Sam is paying an average 3.352% on the entire national debt.

That sounds pretty low… until you look back a couple of years and see the average interest rate was just 1.5% in early 2022.

This means that interest rates have doubled in just 2 1/2 years. Combined with the rapid increase in the national debt, America’s annual interest bill is quickly spiraling out of control.

Back in Fiscal Year 2021, the US government spent around 13% of its tax revenue to pay interest on the debt.  This Fiscal year 2025, it will take around 22% of tax revenue to pay interest on the national debt.

That’s an extraordinary increase in just four years. And it’s quite likely this trend will continue, i.e. interest will eat up a larger and larger portion of annual budget.

Why? Because the debt keeps rising… plus interest rates are MUCH higher than they were a few years ago.

Think about it: over the next twelve months alone, nearly $9 trillion of US government debt will mature; that’s nearly 25% of the entire US national debt maturing over the next YEAR.

Obviously, the government doesn’t have $9 trillion lying around to repay this debt. So instead, they’ll simply issue new debt (i.e. government bonds) to repay the old debt.

The key problem is that the new bonds they’ll have to issue will carry a significantly higher interest rate than the old bonds from a few years ago. And this will continue to push up the government’s average interest rate.

Our analysis– with a lot of help from Grok– is that it will take more than 40% of tax revenue, just to pay interest, by the year 2033 (which happens to be the same year that Social Security’s major trust funds are set to run out of money).

So, it’s not hard to see why the White House is so adamant about bringing interest rates down… and why the President is pushing the Fed Chairman to cut rates.

The President may very well get his way. Last week, a key Fed official who was a member of their interest rate committee (called the FOMC) suddenly and inexplicably resigned. She literally quit with no explanation and with almost immediate effect.

The White House responded quickly by appointing none other than Stephen Miran to fill the post; Miran, as you are probably aware, is one of the key architects behind Trump’s entire economic agenda– everything from the tariff bonanza to the so-called “Mar-a-Lago Accords”.

Not to mention, Miran has publicly called for a weak dollar… which is clear conflict given that one of the Federal Reserve’s key mandates is to maintain a stable currency.

I imagine it will be pretty hard for Miran to maintain a stable currency when he’s working so hard (and successfully) to weaken it.

Point is, Miran will almost certainly be a strong advocate on the Fed to dramatically lower interest rates– and to ‘print’ money– in order to weaken the dollar and bail out the Treasury Department.

The White House will also appoint a new Fed Chairman next year once Jerome Powell’s term expires in the spring.

It’s not a sure thing, but the Trump administration is clearly doing everything it can to take control of the Fed and steer US monetary policy towards lower rates.

If they’re successful and manage to hijack the Fed, the end result will likely be new round of Quantitative Easing (i.e. ‘printing money’), leading to a nasty bout of inflation.

But if they’re not successful, the government’s annual interest bill will probably continue to spiral out of control, eventually leading to… a nasty bout of inflation.

This isn’t exactly controversial; in fact, throughout human history, inflation has almost always been the consequence of governments’ financial mismanagement.

The good news is that America has been in this position before. As recently as the 1990s, the US government was spending well more than 20% of tax revenue just to pay interest on the national debt.

Congress and the White House both acknowledged the problem, and they worked together to address it– primarily by reigning in spending.

Could the same thing happen over the next decade? Of course. But at the moment there seems to be zero appetite for cooperation… or to restrain spending.

So, again, the current trajectory almost certainly leads to inflation.

Now, this doesn’t mean the world is coming to an end. Civilization as we know it is not on the brink of collapse. Future inflation is a very solvable problem. But it requires taking sensible, proactive precautions now… all part of a rational Plan B.

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