Analyst Warns US Debt Crisis May Have Already Begun

The United States may already be experiencing the early phases of a debt crisis, according to Financial Times journalist Robin Wigglesworth, who notes that the situation is unfolding gradually rather than through an abrupt bond market crash. This warning arrives alongside news that US debt servicing costs reached a record $1.1 trillion in fiscal 2026. Rather than immediately triggering a default, the national debt crisis is currently squeezing the federal budget, tightening its grip over time.

US Debt Crisis, Rising Interest Costs And A Slow Economic Squeeze

Wigglesworth, author of A Fabulous Debt, shared on The Long View podcast that while he feels heightened concern regarding the US debt crisis compared to the past, his level of alarm remains lower than that of most observers.

Robin Wigglesworth stated:

“I think the US is maybe in the early stages of what I’d call a chronic debt crisis. It’s just very slow, very gradual.”

Why US Debt Servicing Costs Keep Climbing

A primary driver of the issue is refinancing: Treasuries previously issued at rates between 1% and 3% are now rolling over at rates reaching up to 6%, while the federal budget remains far from balanced. The Committee for a Responsible Federal Budget (CRFB) estimates that interest payments hit a record $1.1 trillion in fiscal 2026, representing 3.4% of GDP—surpassing spending on both defense and Medicare. This expense serves as a clear indicator of the unfolding debt crisis, with debt servicing costs continuing on an upward trajectory. Wigglesworth estimates the current figure sits slightly higher, between 3.5% and 3.6% of GDP.

He further remarked:

“And that is not great. And it is definitely going higher, but it still is another decade before it hits kind of 5%-ish.”

A Chronic Crisis, Not An Acute One

Many observers visualize the US national debt crisis concluding similarly to situations in Argentina or Greece, characterized by default and subsequent restructuring. Wigglesworth rejects that outcome for the United States.

He stated:

“I don’t think that happens in a country like the United States that can literally print dollars.”

Wigglesworth also noted:

“This debt crisis doesn’t play out in hyperinflation, doesn’t play out in runaway bond yields. It plays out as debt eroding America’s financial health and being able to spend less on other stuff it wants to spend money on.”

Not everyone shares this measured outlook. With the 10-year Treasury yield exceeding 5%, CRFB President Maya MacGuineas issued a more urgent warning regarding the US debt crisis:

“A fiscal crisis, once unthinkable, is now a distinct possibility.”

What Venice Teaches About Government Debt

Historical roots for modern fiscal challenges run deep. Wigglesworth’s book traces the origin of bonds back to 1171, when Venice financed a war fleet using tradable loans that offered a 5% annual return. Although Venice never repaid that principal, the Rialto market emerged as the world’s first formal bond market.

Meanwhile, Scope Ratings issued its own evaluation this month, maintaining the US credit rating at AA- while projecting that debt levels could approach 160% of GDP within a decade. Thus far, the debt environment has manifested as a slow grind, leaving Washington with fewer policy tools to address the next economic downturn—a factor of importance for investors holding bonds, equities, or cryptocurrencies. While the national debt crisis may avoid a sudden explosion, Wigglesworth warns it could still prove quite painful.

?Frequently Asked Questions

01What is driving the rise in US debt servicing costs?

Servicing costs are climbing because older Treasuries issued at low rates of 1% to 3% are being refinanced at significantly higher rates of up to 6%, combined with a budget deficit.

02How much did US interest payments reach in fiscal 2026?

According to estimates from the Committee for a Responsible Federal Budget (CRFB), interest payments hit a record $1.1 trillion, making up 3.4% of GDP.

03Does Robin Wigglesworth expect a sudden default like Greece or Argentina?

No. Because the United States has the ability to print dollars, Wigglesworth believes the crisis will not involve hyperinflation or a sudden bond market crash, but rather a slow erosion of financial health.

04What are credit rating agencies projecting for US debt?

Scope Ratings maintains the US rating at AA- and projects that national debt could climb to nearly 160% of GDP within the next decade.

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