Debt and the loss of America’s role as a world leader

As the current and rising total public debt outstanding of $40 trillion continues to skyrocket, the country’s inability to pay it down diminishes its role as a world power.

In 1767 Adam Ferguson, a Scottish political theorist, warned of exorbitant public debt in his “Essay on the History of Civil Society.” In this book, he wrote about what modern economists refer to as the “tax-smoothing” properties of public debt; that is to say, when a government borrows to meet some emergency like a war or a pandemic, and then passes the costs on to future generations of taxpayers.

Ferguson added that the “growing burden” of deferred payments on the debt is “gradually laid.” And when a country begins to “sink in some future age, every minister hopes it may still keep afloat in his own.” He ended with the warning that public debt is “extremely dangerous … in the hands of a precipitant and ambitious administration.”

He concluded with this warning: “An expense, whether sustained at home or abroad, whether a waste of the present, or an anticipation of future, revenue, if it bring no proper return, is to be reckoned among the causes of national ruin.”

To be clear, the United States has carried a debt since its inception in 1776. By 1791, the debt from the Revolutionary War topped $75 million. The only time there was no national debt was briefly in 1835-36 during Andrew Jackson’s presidency.   

Carrying a debt is not necessarily a bad thing; the country borrows money in order to meet its financial obligations, much like a private citizen uses a credit card to borrow with the promise of repayment. What is troublesome, however, is two-fold:  One, the “tax smoothing” of the debt — the passing it on to future generations; and two, paying the interest on the debt.  This dual-headed Hydra is what Ferguson called “national ruin.”

But what is too much debt to be passed on to future generations and how does this ruin a country?

“There’s nothing magic about the $40 trillion number,”  Treasury Secretary Scott Bessent said recently, “and we can grow our way out of that.”

In a sense, he’s right. As the Council on Foreign Relations has pointed out, the chances of this country actually defaulting on its debt are trivial, since the government prints money in which its debt is denominated. The debt can be passed forward to the future, which may have the means and/or ability to balance the budget and pay down the national debt.

On the other hand, continued high deficits result in lower living standards. Simply put, as the government borrows more and more, the cost of money across the economy increases, crowding out private investment, reducing supply, increasing prices, and lowering growth. In the worst-case scenario, the country enters a debt spiral in which government borrowing and interest rates each keeps pushing the other up. This ruins this country’s role as a world power.

Bessent’s analysis is problematic because it ignores the fact that the majority of the government’s spending goes to programs that promise benefits to individuals, such as Social Security and Medicare. Stripping away some of these benefits from the nearly 75 million Americans who receive some form of Social Security and 69 million Americans who receive some form of Medicare would be politically catastrophic. Does anyone really think Congress would raise taxes or cut benefits in order to decrease spending?

And then there are expenditures on the rising costs of national defense. Up until 2024, the government’s spending on national defense ($842 billion) ranked third behind expenditures on Social Security ($1.57 trillion) and Medicare ($1.2 trillion). In 2025, interest payments on the national debt ($970 billion) surpassed defense outlays ($919.2 billion) for the first time in the nation’s history.

While Bessent’s analysis about nothing being magical about the nation’s $40 trillion debt and that the nation can simply economically  grow its way out of the national debt sounds good, it ignores the hard realities of what history strongly suggests lies ahead for this country

In a paper entitled, “Ferguson’s Law: Debt Service, Military Spending, and the Fiscal Limits of Power” (2025) historian Niall Ferguson proposes “Ferguson’s Law,” which states that "any great power that spends more on debt servicing (interest payments) than on national defense risks ceasing to be a great power." He then identifies what he calls the “Ferguson Limit,” the point "at which interest payment exceeds defense spending, as the tipping point after which the centripetal forces of the aggregate debt burden tend to pull apart the geopolitical grip of a great power."

Think of this country’s Social Security and Medicare payments and how hard decisions have to be made to keep them solvent; think of this country’s defeats in Iraq, Afghanistan and, yes, Iran and the money those defeats have cost. These are examples of the “centripetal forces of debt burden” pulling apart this nation’s status as a world leader. Ferguson cites example after example of former world powers, which have reached the tipping point of no economic and geopolitical return and been torn apart by their debt burden.

This country tipped that point in 2025, and as current events around the world suggest, it is steadily losing its credibility and ability to function as a world leader.

Then there will be nothing great about America.

JM Simpson, of Lacey, is a retired community college history instructor.  Currently, he works as a documentary photographer to advocate for the end of homelessness in this country.