Trump once called the national debt a ‘time bomb’ — he was right

In 1981, when the federal government’s accumulated debt reached $1 trillion, President Reagan declared , “If we as a nation needed a warning, this is it.” In 2016, when the debt reached $19 trillion, presidential candidate Donald Trump announced that we “are sitting on a time bomb .” He promised to eliminate the debt in eight years.

This summer, the national debt passed $40 trillion , creating a higher debt to GDP ratio than the U.S. experienced during World War II. Annual net interest payments now exceed $1 trillion , about the size of the 2025-2026 defense budget . They are predicted to double by 2036 , a trajectory the Congressional Budget Office calls “ unsustainable .”

Since January 2025, the debt has gone up almost $4 trillion . Trump’s One Big Beautiful Bill Act will add an additional $4.7 trillion. Earlier this month, Trump promised $5,000 to every adult citizen if Republicans retain control of Congress in the midterm elections. With a price tag of $1.2 trillion, the “Trump dividend,” he indicated, would be funded by “the tremendous economic success ” of the U.S., which “is making so much money” from tariffs.

Economists and congressional deficit hawks have been predicting an economic catastrophe for decades, but it hasn’t happened yet. Perhaps that’s why 98 percent of Americans don’t list the national debt as one of the nation’s most important problems. Many more might do so if they realized that America’s spendthrift ways are hitting them hard, right now.

The national debt isn’t the only — or even the main — factor determining interest rates. But increases place upward pressure on interest rates , in part because the government must offer higher returns on government bonds to attract investors.

Even small increases matter. The Committee for a Responsible Federal Budget estimates that a 0.55 percent increase in mortgage rates would increase payments on a $500,000 mortgage by almost $200 a month, and the lifetime cost of the loan by $64,000.

With limited savings and lower incomes, young Americans are particularly vulnerable to higher interest rates. Home ownership has long been one of the main ways Americans accumulate wealth . Higher mortgage costs keep young people renting longer, while higher financing costs discourage construction of new housing.

As interest rates rise, borrowers pay more for everything from car loans to student loans. But the damage doesn’t stop there.

When the government borrows trillions, it absorbs funds that otherwise support private investment, leaving less money to finance new construction, business expansion, new equipment, and research and development. Over time, this leads to lower productivity , slower economic growth and lower salaries for workers. By one estimate, our debt trajectory will reduce the number of available jobs by 1.2 million by 2035.

A rising federal debt also increases inflationary pressure. According to the Yale Budget Lab , five years after a permanent primary deficit increase of 1 percent of GDP, households lose on average $300-$1,250 in purchasing power.

Just servicing America’s debt imposes extraordinary opportunity costs. The $1 trillion Americans spend on annual interest payments is not available to fix Social Security, fund the national defense, repair or replace aging infrastructure, pay for medical research, or respond to the next pandemic or natural disaster.

When asked how he planned to reduce America’s national debt, Trump told reporters , “the way you take care of debt is with growth, and we have tremendous growth … [which] will take care of that very easily.” But very few economists , other than Secretary of the Treasury Scott Bessent, agree. Most think that managing the debt requires a combination of higher taxes and lower spending as well as economic growth. And that waiting dramatically reduces our options. More importantly, stock and bond markets, as well as foreign countries, who own $9.3 trillion of the national debt, agree.

Nonetheless, politicians continue to kick the can down the road. Nor has the national debt received much attention in the 2026 midterms. Despite his 2016 “time bomb” warning, Trump seems to have lost interest in reducing, let alone eliminating, our national debt. Asked whether he was concerned about rising interest rates, the president replied , “I don’t think so at all.”

But unlike Trump, even Americans who don’t care about the national debt as such care a great deal about the everyday, bread and butter challenges of “affordability” — whether they can buy a house, finance a car, earn a good income, educate their kids, start a business, get medical insurance, and count on Social Security payments.

With his proposed “dividend,” it appears Trump agrees instead with Lionel Stander : “Anyone who lives within their means suffers from a lack of imagination.”

David Wippman is emeritus president of Hamilton College. Glenn C. Altschuler is the Thomas and Dorothy Litwin Emeritus Professor of American Studies at Cornell University.