“A full-throated defense of economic dynamism.” - The Wall Street Journal
“Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
“…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
“…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
“Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
“Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
“There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
“Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
“…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
“…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
“Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
“…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
AI Summary.Estimated sustainable government net debt limits across 25 OECD countries average 234% of GDP under historical interest-rate and growth assumptions (221% for the US) and 214% under current rates (186% for the US). If interest rates rise systematically with debt, the model yields no solution for the US, UK, France, Italy, Greece, and Japan.
Mark WarshawskyAmerican Enterprise Institute
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Warshawsky calculates the US has a sustainable net debt limit, “the lowest level of debt at which a country can no longer service its sovereign debt and must effectively default,” of 186% of GDP, which he forecasts will be reached in ~15 years under current policy and economic conditions.
How high can government debt rise before it becomes unsustainable?
Core argument: Sustainable net debt limits across the US and 24 other OECD countries average 234% of GDP under historical interest rate–growth differentials and 221% for the US, falling to 214% on average and 186% for the US under current, higher interest rates and growth.
Using historical, current, and dynamic interest rate-to-economic growth differentials, countries’ sustainable debt limits are calculated on a net of central bank holdings of government debt basis. Sustainable net debt limits average 234% of GDP for these countries assuming historical rates and economic growth (221% for the US), 214% assuming (higher) current interest rates and economic growth (186% for the US). If, however, interest rates were to rise systematically with debt according to conservative assumptions, there is no model solution for France, Greece, Japan, Italy, the UK, and the US, given their current high debt levels; the average sustainable limit is 178% for the other countries. A reasonable conclusion to draw for the US is that the fiscal path under current policy and trends with rising interest rates is not sustainable in the short to intermediate term. A major fiscal consolidation package will be needed soon, as interest rates rise, unless significantly higher inflation or capital controls will result.
Takeaways by Macro Roundup® AI
Sustainable net debt limits across the US and 24 other OECD countries average 234% of GDP under historical interest rate–growth differentials and 221% for the US, falling to 214% on average and 186% for the US under current, higher interest rates and growth.
If interest rates rise systematically with debt under conservative assumptions, the model yields no solution for France, Greece, Japan, Italy, the UK, and the US given their current high debt levels, while the average limit for the remaining countries is 178%.
A reasonable conclusion is that the US fiscal path under current policy and trends with rising interest rates is not sustainable in the short to intermediate term, and a major fiscal consolidation package will be needed soon unless significantly higher inflation or capital controls result.
Related Articles:
Soaring Bond Yields, Gaping Deficits and Towering Debts: What Could Go Wrong?— An analysis of 22 rich countries estimates that if each refinanced its entire debt at current five-year bond yields, Britain would need the largest primary surplus to stabilize its debt-to-GDP ratio, about 1.5%, followed by Italy at 1.4%, France at 1.2% and America at 1%.
How Might Fiscal Policy Respond to the Rise of Artificial Intelligence?— The Congressional Budget Office estimates that a permanent 0.5 percentage point increase in annual productivity growth would lower publicly held federal debt after 30 years by 39% of GDP, offsetting roughly half the projected rise from 101% of GDP to 175%. Higher revenue and slower spending growth outweigh higher interest costs.
Can AI Avert the Impending Federal Budget Crisis?— U.S. GDP per capita, about $87,000, is projected to reach $102,000 by 2035 with 1.8% annual productivity growth, or $110,000 with 2.7% growth. Because the healthcare sector has been slow to adopt AI, health spending is projected to rise from 18.3% of GDP to 21% under slower growth and 21.7% under faster growth.
AI Summary.US Treasuries erased nearly all gains that followed the Treasury Department's surprise decision to increase buybacks of longer-dated bonds, with the 30-year yield rising above 5.27% and the 10-year touching 4.71%. The reversal signals the move has done little to ease concern about surging government debt.
Michael MacKenzie and Alice GledhillBloomberg
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The 30-year yield rose ~7bps to as much as 5.27%, and the 10-year yield hit 4.71%, erasing “almost all” the gains that followed Treasury’s surprise decision to increase buybacks of longer-dated bonds.
Do bigger bond buybacks ease concerns about surging government debt?
Core argument: The US 30-year Treasury yield rose more than seven basis points to as much as 5.27%, returning to where it stood just ahead of the Treasury Department's buyback announcement, before paring the gain.
US Treasuries erased almost all of the gains that followed the Trump administration’s surprise decision to increase buybacks of longer-dated bonds, signaling the move has done little to alleviate the angst about the surging government debt that has pushed some yields to the highest in close to two decades. The 30-year yield on Thursday rose over seven basis points to as much as 5.27%, where it was just ahead of the US Treasury Department’s announcement early Wednesday, before paring the gain. The 10-year yield touched 4.71%, just shy of its highest level since early 2025.
Takeaways by Macro Roundup® AI
The US 30-year Treasury yield rose more than seven basis points to as much as 5.27%, returning to where it stood just ahead of the Treasury Department's buyback announcement, before paring the gain.
US Treasuries erased almost all of the gains that followed the Trump administration's surprise decision to increase buybacks of longer-dated bonds, suggesting the move has done little to alleviate angst about surging government debt.
The US 10-year yield touched 4.71%, just shy of its highest level since early 2025, as angst over government debt pushed some yields to the highest in close to two decades.
Related Articles:
Bessent Boosts Debt Buybacks After Climb in Treasury Yields— The US Treasury announced it is at least doubling the size of its liquidity support buyback operations for government debt maturing in 10 to 30 years, following long-dated yields reaching their highest levels in years. Yields on the longest bond fell nearly 10 basis points to 5.185%.
The Coming Great Repression?— Across countries and over time, higher public debt burdens are associated with lower relative returns on government bonds, the opposite of standard risk-premium predictions. The authors estimate financial repression—making banks captive bond buyers and loading them with low-return reserves—contributed 90.7 percentage points of GDP to Britain's postwar debt reduction, versus 20.3 from surprise inflation.
The United States Capital Structure— Because Social Security and Medicare benefits are politically untouchable, retirees effectively hold the most senior claim on US government resources while Treasury bondholders hold the riskiest one. On this argument, bondholders absorb adverse fiscal shocks through surprise inflation, financial repression, or both.
AI Summary.The authors find no statistically significant evidence that $190bn in federal emergency K-12 school aid mitigated pandemic learning loss or raised district spending. Districts qualifying for additional funds saw local revenues fall by $907 per pupil over three years, about 8% of pre-pandemic average, roughly 80% from property taxes.
Jeffrey Clemens, Philip Hoxie and Stan VeugerNational Bureau of Economic Research
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Exploiting a discontinuity in K-12 public school districts’ qualification for Covid emergency funding (ESSR), Clemens et al find that the funds did not mitigate learning loss. To a large extent, local districts used them to lower property taxes.
Do federal emergency education grants reduce student learning loss?
Core argument: Districts crossing the 5% poverty cutoff for additional ESSER funds saw local revenues fall an estimated $907 per pupil over three years, about 8% of the pre-COVID average.
Emergency funding for K-12 public schools was an important component of recession spending packages during COVID, involving $190 billion in additional expenditure. We see no evidence that ESSER funds helped to mitigate learning loss, at least in the short run. We find no statistically significant evidence that districts increased expenditures in SY 2021 or SY 2022. We do find evidence that districts that qualified for additional ESSER funds had statistically significant reductions in local revenues that were in excess of their ESSER funds. This pass-through of federal funds may partially explain why ESSER had minimal impacts on learning loss for districts around the 5% poverty threshold. Our estimates suggest that over the three years, crossing the qualification cutoff for additional ESSER funds is associated with a $907 per pupil decrease in local revenues, or about 8% of the pre-COVID average. We show the decline in local revenues as an event study in Figure 3, which includes a flat pre-COVID trend in local revenues per pupil across the qualification threshold. In Table 5,Column 5 [], we can see that about 80% of the revenue decline came from decreases in revenues from property taxes, [which fell] by $718 per pupil across the 3 years. The findings apply specifically to districts in the neighborhood of the 5% poverty threshold for qualifying for additional ESSER funds.
Takeaways by Macro Roundup® AI
Districts crossing the 5% poverty cutoff for additional ESSER funds saw local revenues fall an estimated $907 per pupil over three years, about 8% of the pre-COVID average.
About 80% of that local revenue decline came from property taxes, which fell by $718 per pupil across the three years.
The authors find no evidence that ESSER emergency K-12 funding, totaling $190 billion, mitigated learning loss in the short run, and no statistically significant increase in district expenditures in SY 2021 or SY 2022.
Related Articles:
Aid for Incumbents: The Electoral Consequences of COVID-19 Relief— Using congressional representation as an instrument — an extra senator or representative per million residents predicts roughly $1,000 more aid per capita — the authors estimate that federal pandemic relief strongly predicts incumbent performance in state-wide elections.
What Do States Do with Fiscal Windfalls? Evidence from the Pandemic— The authors estimate that for every $1,000 per capita of federal pandemic aid committed to state and local governments, state revenues and expenditures each rose by roughly the same amount, with $379 going to general government spending and $72 to pension contributions. They find no statistically significant increases in healthcare, education, or infrastructure spending.
AI Summary.The Congressional Budget Office estimates that a permanent 0.5 percentage point increase in annual productivity growth would lower publicly held federal debt after 30 years by 39% of GDP, offsetting roughly half the projected rise from 101% of GDP to 175%. Higher revenue and slower spending growth outweigh higher interest costs.
Karen Dynan, Douglas Elmendorf and Louise SheinerNational Bureau of Economic Research
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CBO baseline projects debt-to-GDP rising from 101% in 2026 to 175% in 2056. Dynan et al. study how AI might modify that projection. In all but their most optimistic scenario, TFP grows 0.5pp faster, and AI offsets 39–49 pp of that 74pp increase.
How much would faster productivity growth reduce federal debt?
Core argument: A permanent 0.5 pp increase in annual total factor productivity growth would lower publicly held federal debt after 30 years by 39% of GDP relative to CBO's extended baseline, offsetting roughly half of the projected rise.
[In the Base Case], faster economic growth [improves the federal budget and debt outlook] through four channels. First, [higher] incomes increase federal revenue, [while] the progressive tax system [modestly] raises revenue relative to GDP. CBO [estimates] that a [permanent] 0.5 pp increase in annual TFP growth would raise revenue after [30 years] by 0.14% of GDP. Second, [although] faster growth increases [some] federal spending, spending rises [more slowly] than GDP, [reducing noninterest outlays] relative to GDP. Under our [assumptions], discretionary spending falls from 6.1% of GDP in 2025 to 4.5% in 2056. Third, because faster growth does not [change the stock of] existing debt, that debt becomes smaller relative to GDP. Fourth, [stronger] growth generally raises interest rates, increasing the [cost] of new borrowing and [refinancing] existing debt. This represents a partial offset to the [fiscal gains]. [On balance], additional annual TFP growth of 0.5 pp would lower publicly held federal debt after [30 years] by 39% of GDP relative to CBO’s extended baseline. CBO’s extended baseline shows federal debt rising from 101% of GDP in 2026 to 175% in three decades, so this hypothesized increase in growth would offset roughly half of that projected rise.
Takeaways by Macro Roundup® AI
A permanent 0.5 pp increase in annual total factor productivity growth would lower publicly held federal debt after 30 years by 39% of GDP relative to CBO's extended baseline, offsetting roughly half of the projected rise.
CBO's extended baseline shows federal debt rising from 101% of GDP in 2026 to 175% three decades later, and CBO estimates a permanent 0.5 pp increase in TFP growth would raise revenue after 30 years by 0.14% of GDP.
Related Articles:
Can AI Avert the Impending Federal Budget Crisis?— U.S. GDP per capita, about $87,000, is projected to reach $102,000 by 2035 with 1.8% annual productivity growth, or $110,000 with 2.7% growth. Because the healthcare sector has been slow to adopt AI, health spending is projected to rise from 18.3% of GDP to 21% under slower growth and 21.7% under faster growth.
U.S. Treasury Investors Are Long in AI— The authors find U.S. government debt has a large positive productivity beta, because the tax code makes federal revenue highly sensitive to productivity growth while spending commitments change little, leaving bondholders implicitly long productivity growth. They argue greater market confidence in sustained productivity gains from AI could substantially reprice government debt, lowering nominal yields.
The Budget and Economic Outlook: 2026 to 2036— The Congressional Budget Office projects the federal deficit will grow from $1.9tn (5.8% of GDP) to $3.1tn (6.7%) over a decade, above the 3.8% averaged over the past 50 years, with rising net interest costs driving much of the increase. Federal debt held by the public is projected to rise from 101% to 120% of GDP.
AI Summary.Because Social Security and Medicare benefits are politically untouchable, retirees effectively hold the most senior claim on US government resources while Treasury bondholders hold the riskiest one. On this argument, bondholders absorb adverse fiscal shocks through surprise inflation, financial repression, or both.
Hanno LustigThe Two Cents
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Lustig argues that bondholders in advanced economies are realizing they are facing higher inflation risk and thus may “sit at the bottom of the capital structure rather than the top,” given transfer recipients’ political power.
Do government bondholders, not retirees, hold the riskiest claim on public resources?
Core argument: Social Security and Medicare beneficiaries, the boomers, effectively sit atop the US capital structure as the most senior claimants holding the safest tranche, given that Social Security is treated as the third rail of American politics.
Social Security is typically referred to as the third rail of American politics. If you buy into that notion, then these retirees collecting Social Security and Medicare checks, the boomers, effectively sit at the top of the US capital structure. If you pursue the analogy with the corporate capital structure, then these beneficiaries are effectively the most senior bondholders. They own the safest tranche. The owners of the Treasurys, the bondholders, sit at the bottom of the capital structure rather than the top. The Treasury owners end up with the riskiest tranche, absorbing adverse fiscal shocks through either surprise inflation or financial repression, or a combination of both. And there is a lot of risk to be absorbed.
Takeaways by Macro Roundup® AI
Social Security and Medicare beneficiaries, the boomers, effectively sit atop the US capital structure as the most senior claimants holding the safest tranche, given that Social Security is treated as the third rail of American politics.
Treasury bondholders occupy the bottom of the US capital structure rather than the top, holding the riskiest tranche and absorbing adverse fiscal shocks through surprise inflation, financial repression, or a combination of both.
Related Articles:
Are Government Bonds Safe in Times of War and Pandemic?— Government bonds severely underperform in wartime, in absolute terms and relative to equities, housing, and economic growth, unlike in financial crises when bonds tend to outperform stocks. The U.S. and U.K. reduced war-driven debt-to-GDP ratios without explicit default, using surprise inflation and financial repression that shifted fiscal burdens onto bondholders.
The Budget and Economic Outlook: 2026 to 2036— The Congressional Budget Office projects the federal deficit will grow from $1.9tn (5.8% of GDP) to $3.1tn (6.7%) over a decade, above the 3.8% averaged over the past 50 years, with rising net interest costs driving much of the increase. Federal debt held by the public is projected to rise from 101% to 120% of GDP.
Our Thoughts on Large US Deficits and Their Impact on Bond Yields— Total borrowing in the US is about average despite high government deficits, as high public borrowing has contributed to the need for higher interest rates that have depressed private sector borrowing. Risk premiums on long-dated debt look about average, with no market signs that economic or debt limits are currently being hit.
AI Summary.U.S. GDP per capita, about $87,000, is projected to reach $102,000 by 2035 with 1.8% annual productivity growth, or $110,000 with 2.7% growth. Because the healthcare sector has been slow to adopt AI, health spending is projected to rise from 18.3% of GDP to 21% under slower growth and 21.7% under faster growth.
Mark WarshawskyAmerican Enterprise Institute
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Warshawsky argues AI may paradoxically worsen the US fiscal outlook, as the income effect of higher overall growth increases demand for low-productivity-growth healthcare. The rise in healthcare spending may “swamp rising tax revenues.”
Does faster productivity growth reduce health spending as a share of GDP?
Core argument: U.S. GDP per capita, about $87,000, is projected to reach $102,000 by 2035 with 1.8% annual productivity growth, or $110,000 if productivity rises to 2.7%.
Currently, GDP per capita is about $87,000. With annual productivity growth of 1.8%, based on historical averages, this welfare measure for the U.S. population will grow to $102,000 by 2035. With productivity rising to 2.7%, per capita income is projected to reach $110,000, a clearly positive result for welfare. Currently, healthcare spending is 18.3% of GDP. With 1.8% productivity growth in the broad economy but not in the healthcare sector, which has been slow to adopt AI, and an aging population, the health spending-to-income ratio is projected to rise to 21% of GDP by 2035, with relative healthcare inflation running at 1.1% annually. When productivity increases to 2.7%, health prices rise more rapidly at 1.8% annually, pushing spending to 21.7% of GDP.
Takeaways by Macro Roundup® AI
U.S. GDP per capita, about $87,000, is projected to reach $102,000 by 2035 with 1.8% annual productivity growth, or $110,000 if productivity rises to 2.7%.
Healthcare spending, at 18.3% of GDP, is projected to reach 21% by 2035 under 1.8% productivity growth, with relative healthcare inflation of 1.1% annually, an aging population, and slow AI adoption in healthcare.
Productivity growth of 2.7% is projected to raise health prices 1.8% annually and health spending to 21.7% of GDP by 2035.
Related Articles:
U.S. Treasury Investors Are Long in AI— The authors find U.S. government debt has a large positive productivity beta, because the tax code makes federal revenue highly sensitive to productivity growth while spending commitments change little, leaving bondholders implicitly long productivity growth. They argue greater market confidence in sustained productivity gains from AI could substantially reprice government debt, lowering nominal yields.
Has the United States Bent the Health Care Cost Curve?— The authors estimate that a slowdown in US health care spending reflects technology-associated changes in health and site of care (21% of the slowdown, double that in Medicare), more elastic long-run supply (6%), market changes reducing and making demand more elastic (11–27%), improved population health (7%), and slower price growth net of upcoding (24%).
The Budget and Economic Outlook: 2026 to 2036— The Congressional Budget Office projects the federal deficit will grow from $1.9tn (5.8% of GDP) to $3.1tn (6.7%) over a decade, above the 3.8% averaged over the past 50 years, with rising net interest costs driving much of the increase. Federal debt held by the public is projected to rise from 101% to 120% of GDP.
AI Summary.Across countries, unexpectedly higher government deficits relative to earlier International Monetary Fund forecasts are associated with unexpectedly higher inflation, measured by each factor's contribution to the increase in public debt, a relationship the author finds statistically significant. This evidence is consistent with a fiscal channel for inflation.
Ricardo ReisLondon School of Economics and Political Science
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Reis compares the IMF’s 2019 forecasts of increases in the public debt over the next 5 years with the actual increases. In OECD countries where deficits turned out to be higher than the IMF expected, inflation also turned out to be unexpectedly higher.
Do unexpectedly larger government deficits coincide with unexpectedly higher inflation across countries?
Core argument: Across the IMF World Economic Outlook country sample, unexpected increases in public debt from unexpected deficits and from inflation over 2019–25 show a statistically significant positive relation.
To inspect the fiscal mechanism, I compare the IMF’s 2019 forecasts for the increase in the public debt over the next 5 years, with the actual increase that we saw. The IMF also puts out forecasts for each term in the accounting identity linking current to future debt in equation (7). Using these forecasts, I constructed the expected increase in debt due to expected inflation, interest rates, economic growth, and fiscal deficits. Then, using the April 2025 actual values for what each of these variables were, I constructed the actual increase in public debt due to the actual evolution of each of these four variables. Subtracting one from the other gives the unexpected increase in public debt, broken down into four unexpected terms, for each country in the WEO sample. Figure 9 plots two of these terms: the unexpected increase in public debt due to unexpected deficits, and the unexpected increase in the debt due to inflation in 2019-25 per country. The figure shows a clear positive relation, which is statistically significant. This says that for countries where deficits turned out to be higher than the IMF expected, inflation also turned out to be unexpectedly higher, using the common metric of their impact on the public debt. The fiscal mechanism is validated using the expectations data. If fiscal developments lead the IMF to raise its expected deficits, then this past experience should lead it to raise its expected inflation as well.
Takeaways by Macro Roundup® AI
Across the IMF World Economic Outlook country sample, unexpected increases in public debt from unexpected deficits and from inflation over 2019–25 show a statistically significant positive relation.
Comparing the IMF's 2019 five-year forecasts for debt, inflation, interest rates, growth, and deficits with April 2025 actual values decomposes the unexpected increase in public debt into four unexpected terms.
Countries whose deficits turned out higher than the IMF expected also saw unexpectedly higher inflation, measured by each variable's impact on public debt, which the author reads as validating the fiscal mechanism.
Related Articles:
Fiscal Influences on Inflation in OECD Countries, 2020-2022— Across 21 economies, the authors find that headline and core inflation responded positively to a measure of government spending increases scaled by pre-pandemic debt-to-GDP and average debt duration. Estimated coefficients of 0.4–0.5 suggest 40–50% of the extra spending was financed through inflation, with the rest through conventional public finance.
Are Government Bonds Safe in Times of War and Pandemic?— Government bonds severely underperform in wartime, in absolute terms and relative to equities, housing, and economic growth, unlike in financial crises when bonds tend to outperform stocks. The U.S. and U.K. reduced war-driven debt-to-GDP ratios without explicit default, using surprise inflation and financial repression that shifted fiscal burdens onto bondholders.
Global Debt Report 2026— Gross central government borrowing across OECD countries rose 7% to a record $17tn, about 23% of GDP, and is projected to reach roughly $18tn, or 24% of GDP. The United States and Japan account for close to 80% of the area's refinancing requirements, with the US share rising from 57% to 70%.
AI Summary.Gross central government borrowing across OECD countries rose 7% to a record $17tn, about 23% of GDP, and is projected to reach roughly $18tn, or 24% of GDP. The United States and Japan account for close to 80% of the area's refinancing requirements, with the US share rising from 57% to 70%.
OECD StaffOrganisation for Economic Co-operation and Development
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Across the OECD last year, $13.5T of governmental debt needed refinancing, 70% ($9.5T) of which was US debt, up from 57% in 2020. The US and Japan were outliers in refinancing requirements relative to GDP.
How high has government borrowing across advanced economies risen?
Core argument: OECD central government gross borrowing rose 7% in 2025 to a record USD 17 trillion from about USD 16 trillion in 2024, and is projected to reach roughly USD 18 trillion in 2026.
The gross borrowing requirements of central governments in the OECD area continued the upward trajectory that began in 2023. This followed decreases in 2021 and 2022 after the large spike in issuance in 2020 at the onset of the COVID-19 pandemic. Borrowing increased by 7% in 2025, rising from around USD 16 trillion in 2024 to a record USD 17 trillion, and it is projected to reach around USD 18 trillion in 2026. As a share of GDP, gross borrowing decreased by almost 1 p.p. to 23% in 2025, but it is projected to rise again to 24% in 2026. Annual refinancing requirements reached a record high in nominal terms in 2025, but declined as a share of GDP. [Sustained output growth resulted in the debt stock as a share of GDP in the OECD area remaining stable at 83% in 2025]. A few large issuers account for the majority of refinancing requirements in the OECD area, with the United States and Japan representing close to 80% of the total (Figure 1.2, Panel B). However, while the share accounted for by Japan declined from 16% in 2020 to 7% in 2025, that of the United States increased from 57% to 70%.
Takeaways by Macro Roundup® AI
OECD central government gross borrowing rose 7% in 2025 to a record USD 17 trillion from about USD 16 trillion in 2024, and is projected to reach roughly USD 18 trillion in 2026.
Gross borrowing as a share of OECD GDP fell by almost 1 percentage point to 23% in 2025 and is projected to rise to 24% in 2026, while the debt stock remained stable at 83% of GDP amid sustained output growth.
The United States and Japan account for close to 80% of OECD refinancing requirements, with the US share rising from 57% in 2020 to 70% in 2025 as Japan's declined from 16% to 7%.
Related Articles:
The Budget and Economic Outlook: 2026 to 2036— The Congressional Budget Office projects the federal deficit will grow from $1.9tn (5.8% of GDP) to $3.1tn (6.7%) over a decade, above the 3.8% averaged over the past 50 years, with rising net interest costs driving much of the increase. Federal debt held by the public is projected to rise from 101% to 120% of GDP.
Are Government Bonds Safe in Times of War and Pandemic?— Government bonds severely underperform in wartime, in absolute terms and relative to equities, housing, and economic growth, unlike in financial crises when bonds tend to outperform stocks. The U.S. and U.K. reduced war-driven debt-to-GDP ratios without explicit default, using surprise inflation and financial repression that shifted fiscal burdens onto bondholders.
Across The Rich World, Fiscal Crises Loom— An analysis estimates most rich countries could keep debt stable as a share of their economies with only small primary surpluses—Britain's required surplus is 0.3% of GDP—even if all debt were refinanced immediately at current rates, but the tightening needed to stabilize debt ratios exceeds 2% of GDP in Britain and America and 3% in France.
