The U.S. Cannot Pay Back Its National Debt—Here’s What Investors Need to Know

The U.S. Debt Problem Is Bigger Than You Think

When people talk about the national debt, it often sounds abstract—like Monopoly money that only politicians and economists worry about. But here’s the truth: America is spending more than it earns, and has been for decades. That imbalance has grown so large that it now threatens the very foundation of our economy.

In 2024, the U.S. government collected about $5 trillion in tax revenue. Sounds like a big number, right? But in the same year, it spent $7 trillion. That’s a deficit of $2 trillion in just one year. Put another way: for every $10 Washington takes in, it spends $14.

This shortfall isn’t new—it’s been happening for 25 years in a row. And every year that gap gets plugged with borrowed money. Today, the total U.S. national debt sits at $37 trillion. If it keeps growing at the current pace—about 6% annually—we’ll be staring down a staggering $70 trillion debt within just over a decade.

Why does this matter? Because debt isn’t free. Every dollar borrowed comes with interest payments, and as debt compounds, the interest burden grows faster than the economy itself. Eventually, interest alone threatens to consume all government revenue, leaving nothing left for essential programs. That’s not just political theater—it’s math.

Why Raising Taxes Won’t Solve the Problem

“Why not just tax the rich more?” It’s the default solution for many, but history shows it doesn’t work the way people imagine.

Today, the top 1% of earners already contribute about 46% of all federal income taxes. Yet, despite decades of tax tinkering, the government’s revenue from income taxes has stayed relatively steady at around 8% of GDP.

In fact, when tax rates were 91% in the 1960s, the government collected almost the exact same share of GDP as it does now with a 37% top rate. That’s because wealthy people don’t just sit still and pay up—they adjust. They hire tax professionals, restructure businesses, move money offshore, or simply stop investing productively.

A vivid example: in the 1970s, Britain experimented with a 95% top tax rate. The result? Major British rock bands—including the Beatles—packed up and left. Even their famous song “Taxman” was a protest against confiscatory tax rates.

The lesson is clear: raising taxes doesn’t reliably increase revenue. It changes behavior. It discourages investment, drives capital abroad, and ironically, often shrinks the economic pie we’re trying to expand.

“When rates get too high, rich people stop investing and start buying more yachts.”

And without more revenue, the spending gap remains.

Why Spending Cuts Are Politically Impossible

If raising taxes won’t fix the problem, what about cutting spending? Unfortunately, that’s even less likely.

In a republic like ours, politicians are rewarded for what they can deliver to their constituents. A senator who brings home a government contract, a new federal facility, or expanded benefits can point to tangible results when asking voters for reelection.

Cutting spending, on the other hand, means taking something away. It means angering constituents who rely on government programs or disappointing lobbyists who fund campaigns. That’s not a recipe for political survival.

This is why spending cuts are more theory than reality. Even when fiscal restraint becomes the rallying cry, Washington tends to trim around the edges while expanding in other areas. The political incentive is always to “do more” and “spend more,” because it’s easier to win votes by promising benefits than by delivering austerity.

So, if taxes won’t go up enough and spending won’t come down, how does the government make up the difference?

Borrowing and Printing: Kicking the Can Down the Road

Washington has two tools left: borrowing and printing money.

Borrowing happens through Treasury bonds—IOUs issued to investors. Who owns this $37 trillion in debt? The breakdown looks like this:

• Mutual funds and ETFs: 15%

• Individual investors: 20%

• Banks, pensions, and insurance companies: 21%

• The Federal Reserve: 14% (money essentially borrowed from itself)

• Foreign governments and investors: 30%

That last category is especially important. Nearly a third of our debt is owed to countries like China and Japan. They buy U.S. debt because, compared to their own options, America still looks like a safe bet. But what happens if that confidence erodes?

The second tool is printing money. When the Fed buys bonds, it isn’t pulling cash from a savings account—it’s creating money electronically. This is sometimes called “monetizing the debt.” It looks like an easy fix because the government is essentially lending to itself. But in reality, it’s just diluting the value of every dollar already in circulation.

The Real Risk: A Debt Spiral Leading to Inflation

Here’s where the danger gets real. Debt grows, interest payments rise, and lenders demand higher rates to compensate for the risk. At today’s 5% interest rates, servicing a projected $70 trillion debt would cost $3.5 trillion annually—about 70% of all current tax revenue. At 10% interest, those payments would double to $7 trillion, which is more than all federal revenue combined.

At that point, the math simply doesn’t work. The government can’t pay interest without borrowing more. And when borrowing becomes too expensive, the only option left is printing money.

But printing money doesn’t create wealth—it creates inflation. More dollars chasing the same amount of goods means prices rise. If unchecked, it leads to hyperinflation where a loaf of bread could cost a million dollars.

And because America is the world’s largest consumer, our inflation exports misery abroad. As the saying goes:

“America gets a cold, the world gets pneumonia.”

People like Elon Musk and Ray Dalio have been sounding the alarm. They warn that compounding deficits and reckless money printing could trigger not just economic hardship, but geopolitical conflict. History shows that when nations spiral into financial collapse, war often follows.

What Rule #1 Investors Can Do

Now, here’s where we turn from fear to strategy. Because while we can’t control Washington, we can control how we invest.

During the Great Depression, countless people were ruined—but others, like Warren Buffett’s mentor Ben Graham, built fortunes by applying disciplined investing principles. He didn’t chase fads or speculate wildly. He bought solid businesses at bargain prices and held them long term.

That’s the heart of Rule #1 Investing. Even in times of uncertainty, businesses with strong fundamentals, competent management, wide moats, and pricing power can not only survive but thrive.

Think about it: if inflation rises, companies with pricing power can raise prices along with it. If the economy slows, businesses with low debt and efficient operations can stay profitable when weaker competitors fold. These are the kinds of businesses we target with Rule #1 strategies.

“Great businesses with strong fundamentals are the opposite of fragile. They can thrive in any environment.”

That’s the antidote to a broken system: own businesses that don’t break.

Turning Chaos Into Opportunity

Here’s the silver lining: chaos creates opportunity. When fear grips the market, stock prices often fall below the true value of great businesses. That’s when Rule #1 investors step in.

Instead of reacting emotionally to scary headlines, we use them as signals to look for bargains. It’s in times of crisis that generational wealth is built—by those who have the patience and discipline to stick to proven investing principles.

This is why I always say: don’t just throw your money into the market. Learn how to analyze companies, understand their value, and wait for the right price. That’s how you protect yourself and your family, no matter how bad the debt spiral gets.

Your Next Step

If you want to prepare for what’s ahead and take advantage of the opportunities that fear creates, I’d love to personally invite you to my 3-Day Rule #1 Investing Workshop.

You’ll learn exactly how to:

• Analyze businesses like Warren Buffett

• Value stocks with Rule #1 tools

• Turn market chaos into long-term opportunity

We don’t sell anything at these workshops—we just teach. And right now, it may be the most important time in your life to sharpen these skills.

• Attend a Rule #1 Workshop

  Learn how to conduct research, choose the right companies for you, and determine the best time to buy.

  Register Today!