This week on Facing the Future we looked back on key fiscal developments of 2025 and previewed the growing debt challenges of 2026. Joining the conversation were Concord Coalition executive director Carolyn Bourdeaux, policy director Bob Zahradnik, national field director Phil Smith and policy analyst/field coordinator Kyle Duffy.
The national debt topped $38 trillion in 2025 and could reach $40 trillion by the end of 2026. During the past fiscal year, interest payments on the debt exceeded $1 trillion for the first time, making it the second largest federal expense trailing only Social Security. New 10-year projections by the Congressional Budget Office (CBO), scheduled to be released on February 11, will show continued escalation of the debt driven by persistent deficits at or above $2 trillion.
“We have a real challenge in this country just getting Congress to start paying attention to these issues,” said Bourdeaux. “The real problem is that Congress has no plan to address this and, in fact, everything they’re putting on the table, from the tax bill to the premium tax credits, may be policies that people really like, but there’s no plan to pay for them, or to start closing that $2 trillion gap between expenditures and revenues.”
Bourdeaux sketched out two scenarios for what could happen if policymakers just ignore the mounting debt. “One is that eventually you overpower the Federal Reserve’s ability to manage the economy,” she said, “and you enter into a period of fiscal dominance, where our fiscal policy is driving interest rates, it’s driving the economy, and ultimately, those things tend to lead to hyperinflation that overpowers the Federal Reserve’s ability to tamp down inflation. The only way out of that is extreme austerity, to really make huge cuts, to raise taxes, so it’s a very unpleasant scenario.”
“Another possibility,” she said, “is that we tackle it in a way that tiptoes around the issue and then what we may face is just a long-term economic drag on the economy. Interest rates stay elevated, they might get higher than they are now. This makes it harder and harder for people to afford mortgages and homes. It makes it harder and harder for people to start businesses. It just depresses our economy for a long, long time in the future.”
Zahradnik added that Americans need to feel a sense of urgency around this. He warned that some people might have a false sense of complacency about the debt because the economy appears to be suffering few, if any, negative effects.
“We haven’t had a recession since COVID,” he said “and that’s a little bit remarkable given some of the headwinds. If there’s any kind of economic downturn in the next couple years, it’s going to be a lot harder to deal with because we don’t have as much fiscal space, because of the size of our interest, because of the size of our debt and deficit. To me, that’s the sense of urgency people should feel. Somebody more clever than me once said, “you can’t repeal the business cycle.” There will be a downturn. It’s just a matter of when and I don’t feel like we’re prepared for when that might happen.”
Smith described a role-playing exercise The Concord Coalition runs called Principles & Priorities, that helps people understand the magnitude of the budget gap and the difficult trade-offs that must be made to close it.
“A lot of people, when they engage in a conversation about the federal budget, always seem to have a silver bullet plan in their mind,” he said. “If you just did this, it would fix the problem. Oh, how I wish there was a silver bullet. We’ve been at this for more than 30 years, and there’s not a silver bullet. When you do the budget exercise, you learn very quickly that there is no easy answer. It’s going to take some hard choices, and we’re going to have to look at both sides of the ledger. But the key point about this budget exercise is that it consistently disarms cynicism. It’s really striking that when people do this they realize that there are no painless solutions, that trade-offs are unavoidable, that shared sacrifice is needed, and they understand that it’s actually possible when they get together face-to-face.”
Duffy singled out two opportunities to rekindle optimism in 2026; the 250th anniversary of the United States as a nation, and the midterm elections.
“People in Congress are going to be celebrating what a great nation we are, while they lead this nation without a rudder,” Duffy observed. “It feels very aimless. We’ve got shutdowns, partisan push-throughs of legislation, unpredictability. It’s really a pressure point that the American people can press these members of Congress on. And something really important is that in these 2026 midterms, senators that are going to be elected are going to have to vote on what happens next with Social Security when it reaches insolvency. That is within these senators’ terms.”
Duffy, who turns 24 this year, said that these points of opportunity “are a way to get our generation to buy back in and start moving towards a future that they feel is accessible and has capacity for their own growth, to build a family, to do what they want with their lives, and to experience the American dream.”
Hear more on Facing the Future. Concord Coalition Senior Advisor Bob Bixby hosts the program each week on WKXL in Concord N.H., and it is also available via podcast. Join us as The Concord Coalition team discusses issues relating to national fiscal policy with budget experts, industry leaders, and elected officials. Past broadcasts are available here. You can subscribe to the podcast on Spotify, Pandora, iTunes, Google Podcasts, Stitcher, or with an RSS feed. Follow Facing the Future on Facebook, and watch videos from past episodes on The Concord Coalition YouTube channel.
