Evaluating the likelihood of a U.S. debt crisis

On July 4th, 2025, just weeks before we finalized this issue of Point/Counterpoint, President Trump signed the One Big Beautiful Bill into law. While estimates vary, most suggest provisions will result in more than a $3 trillion increase in the national debt. Aside from general concerns about shifting costs to future generations, some analysts worry about rising risks of a debt crisis—the potential for a loss of faith regarding the U.S. government's commitment to repayment abruptly destabilizing markets.

Louise Sheiner's and Kent Smetters's essays in this issue provide a very timely assessment of debt levels and associated risks. Their exchange provides a window into the policy and technical judgments that inform alternative estimates of the likely trajectory of U.S. national debt and its consequences. Sheiner's relative optimism rests not only on relatively lower debt levels estimated by, e.g., the Congressional Budget Office, but also on expectations regarding the time and capacity for policymakers to make adjustments to avoid a debt crisis. Smetters argues that higher estimates derived from alternative models are superior, and demonstrate that a debt crisis is a greater, and more imminent, threat. Their exchange highlights the complexity of the technical estimation issues—both the models used, and their specifications—as well as judgments regarding the broader context in which the resulting estimates must be evaluated.