The U.S. is in the Hole. Will We Stop Digging?
Optimist Economy
This episode of Optimist Economy revisits the topic of the U.S. national debt, now over $40 trillion, examining how it grew—37% from tax cut
Key takeaways
- Debt is not inherently bad—its impact depends on how it's used and the direction of its growth.
Main topics
- U.S. national debt trajectory
- Use of federal borrowing during crises
Notable quotes
"We don't have to get the debt to zero. We just need to get it moving in that direction."
Conclusion
The episode concludes that while the U.S. national debt is substantial, it should not be
Transcript preview
Speaker 1 (0:00) ProPublica has broken some of the biggest investigative stories in recent history, from conflicts of interest at the Supreme Court to the deadly impact of abortion bans. Now we're bringing our journalism straight to your ears on a new podcast, Paper Trail. Each episode, we take you inside a new investigation. We'll tell you how some of the best investigative reporters in the country know what they know, and how the world changed in response to their reporting. I'm Jessica Lussenhop. Follow Paper Trail on your favorite podcast app. Hey, optimists. Robin here. Don't get too excited. Optimist Economy is still on vacation. But it did seem like a good moment to maybe rerun this episode that we did last year on the national debt. When we released it in June 2025, the debt was $36 trillion. And last month, in August 2026, it topped $40 trillion. Speaker 1 (0:55) So interest payments on that debt add up to nearly $1.2 trillion a year now, and those payments are the federal government's second biggest expense after Social Security. When this makes me personally feel a little bit panicky, I actually think back on the conversation that I had with Catherine here and its takeaways, including about how debt is in itself neutral, and it depends on what you're buying with the debt and how the debt's trajectory is the thing that matters more than its actual dollar amount. Catherine and I will be back with new episodes at some point later this month. But until then, from June 10th of 2025, here's our episode, The U.S. is in the Hole. Will we stop digging? Hello and welcome to Optimist Economy. I'm Catherine. I'm Robin. On this show, we believe the U.S. economy can be better and we talk about how to get there one problem and solution at a time. Speaker 1 (1:58) For our newer listeners to Optimist Economy, we welcome you to the show and start by saying that you can support us, join us, be part of us at optimisteconomy.com. We have a newsletter that you can subscribe to. We absolutely take donations. We also have a Buy Me a Coffee account where you can do the same. Information on all of this at optimisteconomy.com. Optimisteconomy.com. Just a quick sidebar for our long-term listeners. Doesn't it feel like we're getting more natural at that part? New listeners, we've been good at this the whole time. Old listeners, what about the journey you're witnessing here? You'll notice when I'm uncomfortable, sometimes I speak incredibly quickly. Like, hey, by the way, give us money. We really needed to do the show. Okay, so go bye. Robin, what's your retcon? Speaker 1 (2:45) The only retcon that I had when I listened to our last episode was the question about discharge of debt and bankruptcy. And we had said, for instance, that student loans were among the things that you could not get rid of by declaring bankruptcy, along with other certain things like apparently the injuries you cause in drunk driving accidents and alimony and child support tax debt. So you can appeal. You have to have a special hearing. Yes. Yeah. I mean, it's not easy. It's not easy. It's not automatic. Right. If you go into bankruptcy, you have to file a separate hearing to get permission to discharge your student loan debt. And if you do, they take into account like how hard you tried to pay it back. So it's not just you go into bankruptcy and you have debt and it goes away. Like it's, it's, it still comes down to their behavior and they can say no. Got it. Okay. Red cons for you. Speaker 1 (3:43) I have like a whole host of rep cons. I know you have like a list, I see. I have like, yeah, I have a list going. Well, so just to kind of go backward in time for past episodes, we had a listener write in about the fertility episode saying that we weren't right in how we talked about maternal mortality rates. And I think we were using different measures. So maternal mortality has measures where like you can look how far out you look. whether or not you look at any cause of death or a cause of death related to pre- or postnatal conditions. And so the listener wrote in to say that she works in this space and she thought that we were mischaracterizing maternal mortality. So we posted the letter. Speaker 1 (4:24) And some links to how the CDC talks about how hard it is to measure maternal mortality and kind of the ways that it happens. I think her material point, which is one that we can emphasize here, is that maternal mortality is really uneven in the U.S. Rich women, white women, women in urban areas, women at large teaching hospitals in urban areas, they just have very different risk than, say, someone in rural areas, someone who goes to worse hospitals, women of color. I think that she also pointed out that in her eyes, women are also dying from things that are not directly related to their... Speaker 1 (5:00) childbirth, but things like postpartum depression, suicide, et cetera, and that she thinks that that's also part of the kind of maternal health question. It's an acute time in people's life. Something that I didn't bring up in the fertility episode that this kind of called to mind and was, you know, the other part of my retcon for fertility is we never talked about how people who can limit their fertility because they have such a hard time in pregnancy. Speaker 1 (5:25) Right. You know, and like, okay, I have a rough pregnancy and they don't want to have another one. Yeah, rough pregnancy, rough labor and delivery, rough postnatal care. Like you end up with some type of eclampsia. You have, I don't know what the condition is, but some people have this condition where like they never get over morning sickness and their morning sickness is incredibly acute. And that would be a, I don't think I should do this again because it was so harmful to my health as a woman. That's not something that you can, that policy can fix. Speaker 1 (5:53) But we should recognize that, like, the whole conversation, there was no mention of, like, also pregnancy blows. And if you were to say, you know what, I've had my fill and I am not doing this again, that is another thing that policy, you know, would not change. Not going to change. Not going to change. The child care episode, when we were talking about how fraught friend and family care reimbursement can be, I didn't say plainly. something that I genuinely believe to be true is that this care matters. And it's not easy to incorporate it into a federally reimbursed system, but it's often the type of care that people prefer, especially when their kids are really young. And the difficulty of it doesn't mean we shouldn't do it. I think what I was overemphasizing is I'm so worried that if we get it wrong, it'll be used as like a justification to pull back child care investments. Speaker 1 (6:52) And so I did not, like, give as much space to just how much people like and want friend and family care. And that just because it's difficult to incorporate in the system doesn't mean that we can't. The other thing, I got a comment on one of the socials about this, is that someone said the biggest argument that resonates with conservatives about child care is that people don't think that they'd have a choice in whether they send their kid. Which was wild to me. Yeah, I've heard that too. Like, they won't let me stay home. They're going to make me take my kid to some, like, communist-run... Yeah, government, some sort of government camp childcare. She was like, be sure to tell people that this would still be voluntary. And I was like, why on earth wouldn't it be voluntary? But yeah, I guess that's something that comes up a lot as people are told. Speaker 1 (7:44) kind of in the activating people against more support for childcare, that like you wouldn't have a choice. Like, I guess it resonates on some level of like the government will make you work. I'm like, well, there's a lot of people would say that the government does make them work. So maybe that part is more intuitive than, and you'd be required to take your kid to a childcare center. I wanted to make sure I got that in there. Those are two things I didn't say about childcare. Speaker 1 (8:08) The last thing I'll say about this is that we like getting these comments. This is a long retcon because I was going through a ton of comments beforehand. And I think that this is one thing we like doing about the show. It's just it's not a one direction of conversation. And we like hearing from you. We like getting letters from you at optimist.economy at gmail.com. We like getting comments on the socials and on the sub stack. And it's really helpful. So we like being able to make this more of a conversation. It's not definitive or declarative. Speaker 1 (8:36) Well, it's pretty declarative, but we'll respond. I'm declarative, but I will listen to declarations and response. So was that called dialogue? I don't know. Conversation? Yeah. Speaking of which, did you look up any terms and conditions? You know, I didn't look up a term, but I did. I looked up a condition this week. I knew we were going to talk about the debt, and I also knew that Moody's had, in mid-May, downgraded the U.S. credit rating. And I realized that I don't know anything really about bond credit ratings. So I wanted to know, like, well, where are we? Like, where do we stand? What happened? So we went from a AAA bond to an AA1 bond. This is in a 21-notch system that is, I'm just going to say needlessly confusing, which is AAA, AA1, AA2, AA3. And then it goes into the Bs and then the Cs. Speaker 1 (9:34) What I wanted to know was like, okay, well, who else is AAA? So Germany still is, Australia, Canada, Switzerland, Denmark. We are kind of in the ballpark of like Finland and Austria. Oh, yes. And then also if you wanted to buy government bonds in the Seattle water treatment system, that is also AA1. So, you know, we're right up there with cleaning sewage in Seattle. Robin, this show is called Optimal. No, I mean, Finland's okay, right, Austria? These are okay places. They all sound like countries. They all sound like legit countries. This is our third downgrade. There's three major agencies, Standard & Poor, Fitch, and Moody's. And Standard & Poor and Fitch had already both downgraded. They did it around debt ceiling standoff of like, wow, is this... Speaker 1 (10:28) a government that's supposed to pay us back money that is like really at the fringes of functioning normally. And they did it kind of as a result of the debt ceiling standoffs that we've had. Moody's was interesting. I mean, they basically did it because of the tax bill. And they did it. And said as much. And they said like, you're about to pass a really bad piece of legislation that will add to the debt. Speaker 1 (10:51) that is not fiscally responsible. And like, I mean, in the world of credit rating agencies for bonds, which admittedly isn't necessarily a rodeo, I thought that was a pretty wild report. Yeah. And they just, I mean, it reads like an op-ed, frankly, you know? Yeah. Not exactly what you expect from a state credit rating agency. This brings us to our centerpiece today, which is we wanted to talk about the national debt. Let's talk about the debt. Actually, I wanted to say from the start, I am... Speaker 1 (11:19) impressed that on a show about optimism that you're like, let's talk about the debt. Well, we did get a lot of questions about it. I think the debt instills some kind of natural sense of panic, which certainly like debt in our personal lives is enough to leave one with like low grade anxiety. Yeah. And well, and we just talked about the bond situation and Moody's was fairly strong in its statement about the effects of the budget just paying interest on the debt. Speaker 1 (11:47) which gave me a little bit of a panic attack when I read it. Sure. Yeah, you got to take these things head on. So let's get back to the optimism part later. Okay, we'll work our way up to it. We're going to work our way up. Got to break you down and build you up. The U.S. debt. So this is money that people have lent to the U.S. government, primarily through the sale of treasury securities like bonds, that the government promises to pay back. And the occasion for borrowing mainly comes from the annual shortfall in how much the government collects in taxes and how much it spends in outlays in the given year. If there is a difference there that's negative, it's a deficit. So if you're going to spend $100 but you only took in $95, you've got to borrow the last five. Speaker 1 (12:40) And that is part of the debt. So one way to think of the debt is it is the accumulated deficits that the U.S. has had over many years. Then there are other things that, you know, we can also just sell bonds because people will buy them. And then like Social Security holds a lot of bonds as well as a special debt holder. But it mainly comes from accumulated deficits. Right. I think one of the ways I knew I was an adult was when I understood the difference between deficits and the debt. I remember in the Speaker 1 (13:09) 1992 election, actually, was when Ross Perot was out there with his charts. And that was then, of course, after that election, it was the Clinton administration was the only time in my voting adult life that we had, and I am not young, a surplus. Yes. Did not run a deficit. So the