The debate over whether the United States is risking its economic future by running up ever-larger government debt has flared and sputtered for decades.
President Trump’s dogged pursuit of an expensive set of tax cuts has reignited that clash, but with new urgency.
The federal government’s publicly held debt is already at its highest level since World War II, measuring at about 100 percent of the size of the economy. It is set to grow at a rate that most economists believe would be unsustainable.
That trajectory — and the extent to which the nation can afford to remain on its current path — is complicating the White House’s efforts to nail down support for Mr. Trump’s domestic policy bill, which includes the tax cuts. The proposal is expected to add $2.4 trillion to the debt over the next decade, according to an estimate from the nonpartisan Congressional Budget Office.
But that price tag does not include an additional $551 billion in costs that the United States would have to incur to sustain that level of borrowing, congressional scorekeepers predicted on Thursday, as they warned that debt held by the public would total nearly 124 percent of the nation’s gross domestic product by 2034 if the bill were to become law.
The figures have exposed disagreements among Republicans that have been papered over in recent years, and have contributed to growing unease on Wall Street over the extent to which the White House may exacerbate the sort of borrowing Mr. Trump has promised to reduce.
Over the last few decades, Republicans have largely adopted the posture that it is worth running short-term deficits to cut taxes. Under Mr. Trump, who embraced debt when he was a real estate developer, party lawmakers have maintained that economic growth spurred by lower taxes eventually offsets negative fiscal effects.
Democrats have often made a similar case about spending on education, health care and other services that they argue are investments to make the economy more competitive.
Worried about the Treasury’s ability to pay its creditors, investors have recently demanded more favorable terms — measured in higher yields — to buy up government debt. Those same concerns led Moody’s Ratings last month to downgrade the country’s credit rating.
Normally, the nervousness in the bond market would jolt Washington, since higher yields translate to higher borrowing costs for average consumers.
Lately, though, Mr. Trump and other Republicans have swatted away the pessimism, opting to attack economists for what they have argued were flawed projections. While their reasoning and priorities differ in fundamental ways, figures such as Elon Musk and Senator Elizabeth Warren, the Massachusetts Democrat, have cited the perilous fiscal effects of Mr. Trump’s legislation in opposing it.
“Cut all the crazy spending increases in the Big Ugly Bill so that America doesn’t go bankrupt!” Mr. Musk said in a post on X on Thursday, as he escalated his feud with Mr. Trump.
Mark Zandi, the chief economist at Moody’s Analytics, described recent economic conditions as “fragile” in a nation that periodically flirts with bouts of austerity, sometimes yielding grand bargains that constrain federal spending.
But this time, in an era of extreme partisan polarization, Mr. Zandi said there is little appetite for compromise, making it difficult for policymakers to confront urgent fiscal challenges.
“I actually think it’s going to be very difficult, if not impossible, to be able to collectively come together and address our long-term fiscal situation without pressure from somewhere,” he said.
The fiscal reckoning arrives at a moment of considerable uncertainty for the United States. The worst consequences — including a spiral in which borrowing becomes more costly, forcing the government to incur more and expensive debt — still appear unlikely.
On Thursday, Mr. Trump maintained that the legislation included the “biggest cut in the history of our country,” referring to its inclusion of $1.7 trillion in new savings primarily from cuts to federal programs that aid the poor. He also pointed to a separate report issued this week by nonpartisan congressional analysts that indicated the tariffs he is imposing could reduce the debt by about $3 trillion over the next decade.
The report also found that the duties on imports could slow the economy and cause consumer prices to spike. And the potential surge in revenues would depend on the sky-high tariffs remaining in place well beyond Mr. Trump’s term — and regardless of whether he agrees to deals with other countries meant to lower trade barriers.
Still, the president said that his agenda would deliver a “tremendous surplus.”
Mr. Trump and many Republicans campaigned last year on reducing federal spending. They argued that the government had become bloated and wasteful after Congress marshaled more than $5 trillion in pandemic stimulus, including aid packages signed by Mr. Trump.
“There’s a political alignment that comes often after major deficit binges that tend to occur during crises,” said Romina Boccia, the director of budget and entitlement policy at the libertarian Cato Institute.
Ms. Boccia said that the pandemic spending crystallized the policy divides between the two parties, as Democrats argued that the magnitude of cuts that Republicans began to endorse would destabilize government services — and that the nation’s fiscal woes would be better solved with higher taxes on the wealthy.
Even before Republicans won control of Washington last November, economists had warned that Mr. Trump’s agenda could raise deficits by trillions of dollars. Yet the full impact of their tax plan did not become clear until Wednesday, when nonpartisan budget analysts confirmed the bill would add considerably to the debt by extending and expanding the tax cuts that Mr. Trump first secured in 2017.
Some of those cuts were originally designed to expire this year, a move meant to hold down the projected costs of the tax package and address the concerns of fiscal hawks. But the budget ploy only forced Republicans to revive the debate later, as they now seek to make the bulk of the federal income tax cuts permanent.
“Even in 2017, Republicans talked a lot about deficit concerns,” said Jessica Riedl, a senior fellow at the Manhattan Institute who has advised Republican policymakers. “They still passed the $1.5 trillion tax cuts.”
Then and now, Ms. Riedl said, the party had viewed the cost of its agenda as “more of a communications challenge than an economic problem.”
With new cost estimates in hand, a handful of conservative Republicans this week began to revolt, saying they had squandered an opportunity to meet their own promises about fiscal discipline.
Representative Thomas Massie, Republican of Kentucky, described the legislation as a ticking “debt bomb,” a comment later recirculated by Mr. Musk, who had called it a “debt slavery bill” as he vowed to help defeat it.
Democrats similarly piled on. Senator Chuck Schumer of New York, the Democratic minority leader, said the bill betrayed “years of Republicans decrying that the debt and deficit are the most urgent crises faced by our nation.” Ms. Warren described its price tag as “even worse than we thought.”
As the White House scrambled to defend the measure, financial markets remained unconvinced. While bond prices tumbled on Wednesday because of a weak jobs report, Treasury yields have remained high under Mr. Trump, especially after he imposed global tariffs. The fluctuations have suggested a new reticence among investors about lending Washington money.
Michael R. Strain, the director of economic policy studies at the American Enterprise Institute, said the tumult underscored “growing concerns about the competence of Congress and the White House,” as many investors have begun to ask: “Is the United States government up to managing this?”
Decades earlier, a set of similar forces — skittishness in the bond market and high interest rates — pushed President Bill Clinton to alter his policies. So-called bond vigilantes forced the Democratic administration to focus more on deficit reduction, which along with a strong economy and a technology boom helped to produce the first budget surplus the United States had seen in a generation.
“The only way policymakers get their act together is if they are forced into it, and the only forcing mechanism is the bond markets,” said Kent Smetters, an economist at the University of Pennsylvania’s Wharton School.
An unexpected surge in bond yields earlier this spring even prompted Mr. Trump to scale back some of his trade ambitions, as the president acknowledged the market was getting “yippy” from his tariffs.
Once Mr. Clinton left office, it took a series of other fiscal crises to deliver agreements that reduced federal spending. A standoff between Speaker John Boehner and President Barack Obama in 2011 nearly brought the nation to default before the two parties brokered a deal that forced steep federal spending cuts, which Democrats and Republicans later saw as unnecessarily blunt and painful.
At the heart of the standoff was a need to raise the government’s debt limit, which specifies how much it may borrow to pay for previously approved spending. The United States is once again rapidly approaching that cap under Mr. Trump, who has looked to raise the cap as part of his tax bill while calling on lawmakers to abolish it entirely. The president has said that he hopes to avoid the sort of standoff he had previously encouraged to secure spending cuts.
“It is too devastating to be put in the hands of political people that may want to use it despite the horrendous effect it could have on our Country and, indirectly, even the World,” Mr. Trump posted on social media.
Richard Francis, the co-head of the America’s Sovereigns Rating Group at Fitch Ratings, said this week he still did not “see any meaningful willingness by the administration or Congress to tackle these deficits.”
“It’s just gradually inching up and up and up, from a pretty high level already,” he said.