Result of US Debt Surge

March 13, 2026

The US is heading towards an unsustainable debt trajectory that could trigger global financial shocks, economists have warned lawmakers during a Senate hearing, raising concerns that rising American deficits may push up global interest rates and ripple through emerging economies, including India. Opening the hearing of the Senate Finance subcommittee on fiscal responsibility and economic growth, Senator Ron Johnson said the country’s debt trajectory had reached alarming levels. “Soon it will hit and surpass 39 trillion,” he said, adding that within a decade the national debt would “almost certainly exceed $ 60 trillion”. Johnson said Washington had failed to seriously confront the growing fiscal imbalance.

He argued that federal spending surged during the Covid-19 pandemic and never returned to earlier levels. Ranking member Senator Tina Smith agreed that the country faces a dangerous fiscal outlook but said both spending and falling revenues had contributed to the problem. “Deficits aren’t caused just by spending that’s too high. They are just as contingent on the revenue side of the ledger,” she said, calling the latest budget outlook “a grim picture”.

According to CBO projections, federal debt held by the public will rise from 99 per cent of GDP in 2025 to 120% by 2036 and eventually to 175% by 2056. Stronger economic growth could reduce deficits but would not resolve the problem on its own. Maya MacGuineas, president of the Committee for a Responsible Federal Budget, warned that the growing debt burden now poses risks beyond economics.

According to research cited in her testimony, rising government deficits have pushed up long-term Treasury yields. For a typical 30-year mortgage, she said the increase in borrowing costs amounts to about “$ 2,500 per year” or roughly “$ 76,000 over the life of the loan”.

Economists at the hearing also warned that a full-blown fiscal crisis in the US could send shockwaves through global financial markets. Swagel said such a crisis could lead to “sharply higher interest rates, a weaker dollar, lower investment, lower consumer spending, fewer jobs”.

Because US Treasury securities underpin the global financial system, higher American borrowing costs often translate into tighter financial conditions worldwide. Analysts say rising US yields can influence capital flows, currencies, and borrowing costs in emerging markets.

For countries such as India, shifts in US interest rates and Treasury yields are closely watched by policymakers and investors because they can affect global capital flows, exchange rates, and financing conditions across developing economies.