Donald Trump · Iran · Fortune Technology
The U.S. economy is running hot and stuck on a hamster wheel as GDP growth must outpace borrowing costs—or risk getting sucked
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High gas prices and low consumer sentiment over the cost of living have obscured how robust the U.S. economy has been lately.
Key facts
- Capital expenditures from Alphabet, Amazon, Microsoft, Meta, Oracle, and SpaceX are projected to total $870 billion this year, up from $470 billion in 2025
- With interest rates on new Treasury bonds and notes at around 5 % and medium-term nominal economic growth expected to be closer to 4%, the U.S. is entering a debt spiral,” CRFB said Wednesday
- The federal government’s $2 trillion annual budget deficit also represents more stimulus
- In addition, yields topping 5% would start to approach nominal GDP growth, making the national debt even more unsustainable, he pointed out in a recent Financial Times op-ed
Summary
Not only has the economy absorbed shocks from President Donald Trump’s tariffs and war on Iran, it has been running hot. Federal Reserve policymakers recognized that the economy isn’t resilient but thriving as they hiked interest rates earlier this month to rein in inflation. At the same time, the prospect of a hot economy that adds more inflationary pressure has sent Treasury yields soaring, creating a heavier burden for servicing $40 trillion in U.S. debt. That means the economy is stuck on a hamster wheel, scurrying to outrun borrowing costs and avoid a reduction in speed that allows debt to grow faster than the economy.