National debt is already killing the American Dream, says top economist—and it might push the U.S. into an outright depression

However, many of these symptoms trickle back to the vast sum America owes to its debtors, according to Kurt Couchman, a senior fellow in fiscal policy at thinktank Americans for Prosperity. In the final three months of 2025, the government spent $276 billion in interest on the debt, which the likes of Bridgewater Associates founder Ray Dalio warn will one day squeeze out government investment needed to bolster economic prosperity.

In a Congressional testimony last month, Couchman told the House Judiciary Subcommittee on the Constitution and Limited Government that “the growing debt risks a bond market reckoning with potentially dire consequences for the American people. The actions of their representatives in Congress will determine whether the conditions of the American Dream—peace, freedom, and prosperity—survive, or if the future is decline.”

Already, that future is being hampered, Couchman, author of ‘Fiscal Democracy in America’, told Fortune in a phone interview. The affordability crisis (inflation by any other name) was largely sparked by an “explosion” in monetary supply at the onset of the pandemic, he outlined.

“We’ve already experienced the inflationary aspects of excessive federal spending and debt,” Couchman, who previously worked in government addairs positions in the Committee for a Responsible Federal Budget, said. “We’re now at the point where if you look at [the Congressional Budget Office], World Bank and [International Monetary Fund] and others, they say that once the debt burden achieves it surpasses a certain threshold of GDP that it starts to slow the economic growth.”

Economists aren’t necessarily worried by the total level of debt (in fact, government debt is a necessary foundation of global markets). Rather it’s the debt-to-GDP ratio, which measures a nation’s borrowing against its growth. If this tips too far out of balance, growth can be hampered by the excessive amount of cash needed for interest payments.

“So that means there’s fewer opportunities,” Couchman added. “The opportunities that are there aren’t paying as well. Productivity is being suppressed.”

Is the worst-case scenario reality?

The worst-case scenario is a debt crisis. This is the moment at which the U.S. cannot find buyers for its debt and is either forced to rein in spending, agree to higher interest payments to secure loans, or significantly increase its money supply to lower the value of the repayments—which comes with inflationary or hyper-inflationary effects.

In this case, Couchman believes, the “likelihood of having a recession, if not a severe recession or maybe even a depression, become possibilities.” He added: “The global, economic instability could translate into some real security risks and even threats to our political systems because of the kinds of politicians that people may respond to if they’re feeling especially desperate. Those are all challenges to the American dream that stem from the growing debt burden.” 

Many speculators argue that while national debt is a problem, it is not a crisis that will ever become a reality: After all, one could argue the U.S. is too big to fail, and has within its own power the ability to avert such a squeeze.

And yet, Couchman argues that while a recession is an inevitability (“they happen every five years on average, plus or minus a few years, so sooner or later we’ll have one of those”) America has a chance to avoid anything more sinister if it “learn[s]] from the mistakes of others abroad or in the states before we get to that moment and turn the ship.”

A solution

There’s no easy fix for the government’s spending habits. At least, not a solution which will be popular, and as such, not one which elected politicians will be keen to put their neck on the line for. Because of this, the national debt issue is often described as a game of “chicken” with one administration to the next betting their successors will be the administration to address the poisoned chalice.

There are many options to rectify the balance, the least popular being to pull back spending. More broadly, the federal government could adopt a set of budget-balancing “fiscal rules.” While a more palatable option, that also means it’s less effective: According to an analysis from Oxford Economics of IMF data for more than 120 countries, on average, there’s a 1.1%-of-GDP improvement in the primary balance in the three years up to and including adopting a fiscal rule. However, there’s then a deterioration of the exact same percentage in the subsequent two years.

Couchman’s request is simpler: Transparency. The author and economist is making the same plea as Thomas Jefferson did to his Treasury Secretary more than 200 years ago, when he wrote: “We might hope to see the finances of the Union as clear and intelligible as a merchant’s books, so that every Member of Congress and every man of any mind in the Union should be able to comprehend them, to investigate abuses, and consequently to control them.”

“The most important thing Congress could do, to not only fix the budget but also restore democracy within Congress, is to do a real budget with all spending and all revenue in it so you can see everything,” Couchman said. “All the committees will get to manage their portfolios, and you can have real discussions about trade-offs, what’s more valuable, what’s not, what we need to do, and what we can live without.”