Fisher Investments Reviews Whether the US Government Can Handle Its Debt

illustration of a hand examing dollar bills

Fisher Investments Market Perspectives

By Fisher Investments — 9/29/2023

Thirty-three trillion dollars.

In hundred-dollar bills, $33 trillion would weigh over 363,000 tons. That’s the physical weight of the United States’ national debt. It’s also about how much the Empire State Building in Manhattan weighs. 1

Thirty-three trillion dollars is a staggering amount of money. As the national debt has grown, politicians and the news media have used it, along with the debt ceiling and the threat of government shutdowns, as a way to grab attention and drive headlines. However, those headlines often obscure the complete story of how the national debt affects the US economy and the stock market, especially in the near-term.

It would be concerning if the US federal deficit continued to grow, particularly as quickly as it did during the COVID-19 pandemic. However, as we’ll explore in this article, the most important factor we consider when looking at national debt is the country’s ability to continue making interest payments on, or service, that debt. As Ken Fisher, the founder, Executive Chairman and Co-Chief Investment officer of Fisher Investments, covered in his recent video, “Ken Fisher Debunks: America Can’t Handle Its Debt,” at some point, national debt may perhaps become unmanageable, which could prove problematic. However, since markets look 3 to 30 months into the future, our focus remains on the US’s ability to service its debt and the potential it defaults on that amount in the immediate term, which in our view, shouldn’t be a cause for investor worry.

US Government Debt

The federal debt is the amount of money the government has borrowed to pay for expenses that federal revenues don’t cover. Primarily, the US government accomplishes this by borrowing money from investors via Treasury bond sales. Given the growth of US government debt over the last several decades, it’s logical to wonder if the US federal government risks defaulting on, or failing to pay, what it owes. Investors, particularly, worry about the impacts to the stock market and the global economy.

Over time, US debt levels have continued to grow. Hover over the chart to see how debt levels have changed.Over time, US debt levels have continued to grow. Tap the chart to explore.

Default: The (Low) Risk the US Government Can’t Pay What It Owes

A default is the failure to make interest payments or repay a Treasury bond’s principal—the amount borrowed. While the total debt amount appears astronomical, you should consider the other components of the government’s financial picture. For example, the government (via the US Treasury) can issue new debt to refinance maturing bonds. Therefore, the main question is whether it can comfortably continue to make interest payments.

It’s similar to how you’d evaluate your own finances. The amount you owe on a mortgage or auto loan is only problematic if you can’t afford your monthly payments. For example, if your monthly debt payments were $3,000, you’d be in trouble if your monthly income was only $2,000. However, if you brought in $10,000 a month, you could easily afford your debt payments. On this front, the US federal government appears able to easily carry the current debt load.

The US Government’s Ability to Pay Its Debts

There are a couple common ways to measure the government’s ability to pay its debt. The first is the cost of that debt, measured by the interest rate the government pays. Fortunately, decades of historically low interest rates have kept the average interest rate on US government debt under 3%. That means, until recently, as old debt matured the government often replaced it with lower-cost debt, helping to keep interest costs manageable.

Even with recent rate increases, the US hasn’t seen such favorable interest rates since 2010.

Another way of measuring the government’s ability to pay what it owes is comparing its current interest payments with its main income stream: tax revenues. Even with some fluctuations, tax revenues far surpass interest expenses. Since 1950, federal interest payments have been a maximum of about 18% of tax revenue. Currently, that number stands below 10%.2

As of 9/28/2023, federal interest payments only take up about 10% of tax revenues, easily bearable by the government.

What’s more, the Treasury can prioritize interest payments over other federal expenditures. So, even with recurring episodes of potential government shutdowns and debt-ceiling debacles, Fisher Investments believes an actual default is incredibly unlikely. As towering as the federal debt may seem, the government is currently more than able to manage what it owes. We believe that means there is likely very little impact to the stock market in the near future. For now, we think it’s most important to stay focused on your long-term investment goals and keep the US government debt in perspective.

1Source: Empire State Realty Trust, “Empire State Building Fact Sheet,”

2Source: US Department of the Treasury, as of 9/28/2023. Average interest rate consists of total interest-bearing US government debt, which does not include Treasury inflation-protected securities and floating rate notes. 1/31/2001 to 8/31/2023.

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