The other night I was having dinner at the bar at a nice restaurant in New York (a near-daily occurrence for me). Soon after ordering a dirty martini, a similarly single individual sat down next to me. Sadly, it’s never a shupermodel and almost always a fellow businessperson. Within minutes he began engaging in conversation. That’s pretty much par for the course in Manhattan; we find our socialization over dinner with the random stranger to our left or right.
On this particular evening at the famed P.J. Clarke’s on the Upper East Side, a conversation that started with small talk morphed into the state of the country. My “friend” was unhappy with the current economic state of affairs and hypothesized that a new resident (that wore a different colored tie) at 1600 Pennsylvania Ave., would be the holy grail. I didn’t want to burst his bubble, but I’ve learned a few things from years of attending those ITR Economics presentations, one of which is that red or blue has little to do with the economy. And that’s been proven.
Here’s the reality: Every four years, Americans fall in love with a fantasy. A new president will change the federal deficit. Republicans promise growth will outrun the debt. Democrats promise taxes on the rich will fix it. Meanwhile, the U.S. debt clock keeps spinning like a Vegas slot machine that only pays out in red ink.
As of July 2026, the United States owes roughly $39.6 trillion, and it’s climbing about $5 billion per day. The net interest payments on the debt officially exceed our annual defense budget. We’re not talking politics here; we’re talking pure math.
The Trump plan consists of growth + tariffs + tax cuts. His economic philosophy has been to extend tax cuts and no tax on tips, overtime or Social Security. Add tariff revenue (that’s been a wild ride, hasn’t it?), shrink bureaucracy and grow GDP faster than spending. That worked well when debt was $20 trillion lower and interest rates were near zero. But today’s numbers are very different. The Congressional Budget Office estimates current policy paths keep deficits near $2 trillion annually and push debt to about 120% of GDP within a decade.
Here’s the translation: Even if the economy hums at an insane rate of GDP growth, the government is still spending dramatically more than it collects. If I try to do that, the words “bankruptcy,” “foreclosure” and “card declined” creep into my vocabulary. Why is it that nobody understands revenue and expenses in Washington, D.C., and that 85% of our revenue comes from the two buckets of personal income tax and payroll tax?
The truth of the matter—and this is what I tried to explain to my random dinner buddy the other night—is that the real problem is not taxes or tariffs; it’s interest. Lots and lots of interest. Interest on the debt alone is projected to exceed $1 trillion in 2026 and now roughly 14% to 15% of federal spending. That means before we fund defense, Social Security, Medicare, infrastructure and our veterans, about 15% of the income is spent. It’s like playing credit card roulette and the interest just keeps compounding with no end in sight. No State of the Union message given by any Republican or Democrat can outgrow a compounding interest bill this large.
It’s simply not sexy for a politician to campaign on math. It’s not a good look. In the last fiscal year, the government spent $7.01 trillion and collected $5.23 trillion. That’s a deficit of $1.78 trillion for those keeping score at home. If you allow me to do that, I’ll buy that house in Malibu on the ocean tomorrow. Maybe I’ll buy you one, too.
To erase the deficit, you would need one of the following to happen:
- Raise taxes roughly 35% (think about top tax rates going from 37% to 50%) and remember almost half the people in America don’t pay federal taxes whatsoever. I do not endorse this.
- Cut benefits massively, which really means one of the big three: Medicare, Social Security or Defense. I do not endorse this.
- Grow the economy at wartime levels for a decade. Impossible.
The reason Trump can’t fix it, nor can anyone else for that matter, is because current policies that add tariff revenue are projected to still increase deficits over time because tax cuts reduce revenue faster than tariffs raise it. The truth we all need to face is America has a “promises” problem. Nobody wants to sacrifice, and when you are in debt, something has to be sacrificed to get out of it. You can’t go to Nobu when you can’t pay your credit card bill.
The federal debt isn’t going to be eliminated. It will be inflated away, written off, monetized or slowly eroded by negative real interest rates because, mathematically, a $38.5 trillion balance sheet cannot be balanced with incremental policy tweaks. The U.S. doesn’t default. It dilutes.
Presidents don’t control the deficit anymore. Trump can change tax policy. Congress can try to change spending. But reality is reality. Changing this quickly is like turning the Queen Elizabeth around in a bathtub.
Unless America changes expectations—or sacrifices are made on both sides of the aisle—the debt clock keeps running no matter whose name is on the Oval Office door.
