By the time President Harry Truman left office in 1953, the United States had spent the better part of a decade paying down the debt it had run up to win World War II. The peak—reached in 1946—was 106% of GDP, a number so large that policymakers spent a generation treating it as the high-water mark of what the country could survive.
That mark is about to fall.
According to a new chart book, Spending, Taxes, and Deficits: A Book of Charts, released in April by Jessica Riedl, a budget and tax fellow at the Brookings Institution, the federal debt held by the public is projected to reach 137% of GDP within a decade—blowing way past the World War II peak. It’s what what budget analysts now call a “current-policy” baseline that assumes the extension of expiring tax cuts and roughly stable discretionary spending. The gross national debt itself crossed $39 trillion in March in less than five months after it hit $38 trillion, and is what the Peter G. Peterson Foundation called a “staggering” pace of accumulation with few precedents outside wartime.
“Borrowing trillion after trillion at this rapid pace with no plan in place is the definition of unsustainable,” Peterson Foundation CEO Michael Peterson told Fortune when the milestone hit.
The deficit’s center of gravity has shifted
For most of the postwar era, deficits were episodic. They blew out during recessions and wars and contracted during expansions. But now, the 2026 deficit is on track to hit 5.8% of GDP—at a moment of relative peace and full employment—and Riedl’s current-policy baseline projects it climbing to roughly 9% of GDP by 2036, a level the U.S. has otherwise reached only during crisis: the Great Depression, World War II, the 2008 financial crisis, and the COVID pandemic.
In nominal terms, the annual deficit is projected to grow from roughly $2 trillion today to $4.4 trillion by 2036.
What’s driving it isn’t a mystery. Medicare alone is on track for a $109 trillion cash shortfall over 30 years—79% of the entire projected deficit. The typical retiring couple, Riedl notes, will receive about $3 in Medicare benefits for every $1 they paid into the system.
Riedl’s data in the 132-page book show that nearly the entire $2.3 trillion increase in annual deficits between 2023 and 2036 is attributable to rising shortfalls in just two programs: Social Security and Medicare. This is a reason, not an excuse: the Congressional Budget Office projects $138 trillion in cumulative deficits through 2056, but if you strip out Social Security and Medicare, the rest of the federal budget actually runs a $19 trillion surplus over that period. The two retirement programs run a combined $157 trillion deficit.
Riedl projects Social Security and Medicare’s combined cash shortfall, including the interest costs on the debt issued to backfill them, will hit 18.4% of GDP by 2056—roughly equivalent to the entire federal budget in a normal year.
“Virtually impossible” to balance through cuts
One of the charts in the Brookings report is titled “Balancing the Budget in 10 Years on Lower-Priority Spending Cuts Alone is Virtually Impossible,” and the view is pretty gloomy. To balance the 2036 budget through equal program cuts across the board, lawmakers would need to slash every program by 36%. Keep those cuts away from Social Security and Medicare, and the required cut on everything else jumps to 69%. Take veterans’ benefits off the table too, and the figure climbs to 80%. Add defense to the protected list, and the necessary cut to whatever’s left reaches 117%. As in: cut everything else to zero, and the budget still doesn’t balance.
This is roughly the position Washington finds itself in. Discretionary spending, what Congress appropriates each year for things like defense, education, justice, transportation, and scientific research, has fallen from 12% of GDP in the early 1960s to roughly 6% today, and is projected to keep falling. Defense outlays, at 2.8% of GDP, are at their lowest share of the economy since before World War II. Cutting it to NATO’s 2%-of-GDP target would save about $4 trillion over a decade, a real number that nonetheless covers only about a fifth of the projected deficit over the same period.
Riedl told Fortune in March that recent White House proposals amount to “an historic defense spending increase coupled with fake offsets on spending and revenues” and that the resulting trajectory—annual deficits exceeding $4 trillion by 2036—is “totally unsustainable.” She added, “They can’t be the party of endless tax cuts, historic defense spending hikes, and still not touching Social Security and Medicare. Something’s got to give.”
Taxing the rich won’t close the gap, either
If cuts can’t do it, what about taxes? Riedl’s menu of tax-increase options shows that even the most aggressive proposals raise modest sums relative to the long-term shortfall.
A 10-percentage-point across-the-board hike in income tax rates would raise about 3.5% of GDP, not enough to stabilize the debt. A 20% national value-added tax would raise 2.8% of GDP. Senator Bernie Sanders’ proposed 8% wealth tax? Just 0.6% of GDP. Raising the corporate tax rate from 21% back to 35% would be 0.5% of the GDP. Eliminating the Social Security payroll tax cap entirely: 0.9%.
Drawing on her 2023 Manhattan Institute paper The Limits of Taxing the Rich, Riedl estimates that maxing out a politically plausible package of tax hikes on the top 1%–2% of households—raising the top two brackets, taxing capital gains as ordinary income, restoring 2009-level estate taxes, raising the corporate rate to 28%, plus aggressive enforcement—would raise about 2.1% of GDP.
Riedl’s analysis shows that stabilizing the debt at 100% of GDP requires roughly 5.7% of GDP in non-interest savings by 2036, rising to 10.8% by 2056. Taxing the rich, in other words, gets you about a fifth of the way there.
A separate Brookings chart drives the point home. Even imposing a 100% tax rate on every dollar of income earned above $1 million by households, small businesses, and investors would raise about 5% of GDP. The projected 2056 deficit alone is 14% of GDP.
The biggest risks
Reading the report alongside Fortune‘s recent coverage, four risks dominate.
Interest rates. The CBO’s “rosy” baseline assumes the average interest rate on federal debt levels off at 3.9% and never rises above 4.2% over 30 years. Each one-percentage-point increase above that adds $3.3 trillion to the decade’s borrowing—and roughly $57 trillion (about 60% of GDP) to the 30-year debt. If rates merely return to 5.9%—a level the U.S. saw in the 1980s—annual deficits hit nearly $5.4 trillion by 2036 instead of $4.4 trillion. Net interest costs would consume more than half of all federal tax revenues by 2056 under the baseline; under a higher-rate scenario, they consume 124%. The IMF warned in April that “the window for orderly fiscal adjustment is narrowing” and that the U.S. faces “inescapable” arithmetic.
The bond market. Fortune‘s reporting through 2026 has documented mounting strain in Treasury auctions amid the war in Iran and the rapid pace of debt accumulation. Former Treasury Secretary Henry Paulson warned that escalating debt could push investors to demand higher yields, driving rates up and worsening the deficit. JPMorgan Chase CEO Jamie Dimon, in remarks at a Norwegian sovereign wealth fund conference in late April, was blunter: “The way it’s going now, there will be some kind of bond crisis, and then we’ll have to deal with it.” A separate IMF analysis found that the historic “safety premium” Treasuries enjoyed over comparable sovereign debt has nearly evaporated, with the European Investment Bank now able to borrow at yields just 0.04 percentage points above Treasuries.
Trust fund insolvency. Riedl’s data show the Social Security retirement trust fund is just six years from insolvency. Medicare’s hospital insurance trust fund hits the wall a little earlier. After exhaustion, the current law requires automatic benefit cuts of roughly 20%—a politically intolerable outcome that virtually guarantees a general-revenue bailout, adding directly to the debt. The CBO assumes that the bailout is in its baseline. Stephen Goss, the longtime Social Security chief actuary, has long argued that the closer Congress gets to insolvency, the smaller the menu of policy fixes becomes.
Reserve currency risk. Dimon, in earlier remarks reported by Fortune, framed the long-run question starkly: “If we are not the preeminent military and the preeminent economy in 40 years, we will not be the reserve currency. That’s a fact. Just read history.” Federal Reserve Chair Jerome Powell, in a March appearance, drew a careful distinction: the level of debt is sustainable, he said, but the path is not. “It will not end well if we don’t do something fairly soon.”
Why this time looks different
The standard rejoinder—that hawks have been warning about the debt for decades and the sky has not fallen—is true, and it’s the reason the debate has lost much of its political urgency. But the structural picture has shifted in ways that make the next decade qualitatively different from the last three.
In 2026, the federal government will spend more on interest than on defense, a milestone reached in 2024 and now permanent under any plausible baseline. Within a decade, Brookings projects interest to consume more than 30% of federal revenues. By 2040, net interest is projected to be the single largest line item in the federal budget, eclipsing Social Security. Mandatory spending has grown from 34% of the budget in 1965 to 75% today. Discretionary spending has been squeezed to 13%, divided roughly evenly between defense and everything else.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, framed the political problem this way to NPR earlier this month: “We have two parties who are always trying to outbid each other by giving away more, both spending and tax cuts. The fiscal pander has become the default political move these days, and that’s really how the debt situation is so bad.”
For this story, Fortune journalists used generative AI as a research tool. An editor verified the accuracy of the information before publishing.
