Stretch ceiling: will there be a default in the United States due to the record national debt of $37 trillion

America's national debt has broken a new record, exceeding the $37 trillion mark, but the dollar remains the world's currency, and the American economy is the largest in the world, and confidence in it is still high, experts interviewed by Izvestia believe. Although the threshold for allowable borrowing of $36.1 trillion was overdue back in January, it has not yet been raised. Against the background of a new high, there was talk of default within the United States again: US Treasury Secretary Scott Bessant believes that it will happen by the middle or end of summer. Nevertheless, most likely, the Congress will come to an agreement again and raise the acceptable threshold, but the collapse will not happen, experts say. How the situation may develop is described in the Izvestia article.

The US national debt in 2025

The US national debt has crossed the $37 trillion mark, setting a new record. Despite the fact that this indicator has reached a historically high level, this does not mean that the country will soon default, analysts interviewed by Izvestia are confident.

In the traditional sense, state bankruptcy is unlikely — the US economy is still considered one of the most reliable in the world, says Sergey Potapov, senior analyst at BCS World Investments. Moreover, it is the world's largest economy — in 2024, the country's GDP exceeded $29 trillion, which is one and a half times more than that of its closest competitor, China.

Photo: Getty Images/Jemal Countess

— The increase in debt reflects long—term financial imbalances, but does not indicate a shortage of funds - investors continue to actively purchase US government bonds, and demand for them remains stable. The problem lies not in financing, but in the legislative restriction on the growth of borrowings," said Sergey Potapov.

The fact is that the United States has a prescribed limit on the size of the national debt — the so-called ceiling, which can only be raised by a decision of Congress. In June 2023, this threshold was temporarily suspended until January 2025, that is, until the new administration headed by Donald Trump came to power, Olga Belenkaya, head of the Macroeconomic analysis department at Finam, recalled. Since January 2, the ceiling has been set at $36.1 trillion. Thus, for several months now, the country has been living in conditions where the legal limit on the national debt ceiling has been exceeded, but the United States continues to increase borrowing and the economy is working.

Photo: Getty Images/Mark Wilson

The world's rating agencies have already reacted to this, but rather cautiously. In May 2025, Moody's downgraded the U.S. rating from AAA to AA1 for the first time since 1949. Before that, back in 2011, S&P changed its indicator for the United States to AA+, and Fitch did it in 2023, Sergey Potapov recalled. Nevertheless, the May changes were related not only to the national debt, but also to the introduction of customs duties, which caused a violent reaction in the markets, said Yuri Ichkitidze, macroeconomist at Freedom Finance Global.

According to Sergey Potapov, the situation in the US economy has not yet caused a large-scale sale of treasuries (government debt securities). So far, the attractiveness of US debt in the eyes of long-term institutional investors, especially pension and insurance funds focused on the highest rating, is only gradually decreasing.

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What is the debt ceiling?

The US national debt is growing due to the systematic budget deficit that has developed due to high defense spending and various social programs.

Now the new American president is trying his best to support the economy. In an attempt to increase the revenue component of the US budget, he introduced protective duties and started a new round of trade wars, said independent expert Andrei Barkhota. At the same time, the refusal to set a new ceiling is part of his election rhetoric.

Photo: REUTERS/Mike Blake

Nevertheless, not everyone in the United States agrees that the national debt is at a safe level. In June, entrepreneur Elon Musk wrote on the social network X that America could become de facto bankrupt. "And all tax revenue will be spent on paying interest on the national debt, leaving no funds for anything else," the entrepreneur wrote.

In June, U.S. Treasury Secretary Scott Bessent also stated that without a change in the borrowing limit, the government could face a shortage of liquidity as early as August or September.

We are talking about the so-called X—date, the moment when the US Treasury will run out of resources to cover current obligations, recalled Sergey Potapov from BCS World of Investments. The authorities are now using temporary emergency measures. If the parliament does not adopt a law on increasing the debt ceiling, a technical default may occur — late payments on obligations, he added.

What will happen to the American economy in 2025

Nevertheless, a default in the United States is still unlikely. In particular, the US dollar remains the main global reserve currency, which ensures steady demand for government bonds of this country, since investors are not afraid that the exchange rate will fall, said Elmira Assiaeva, Associate professor of the Department of Global Financial Markets and Fintech at Plekhanov Russian University of Economics.

In addition, the U.S. Congress has historically always found a compromise to raise the debt ceiling at a critical time for the country, she added. At the same time, long—term risks remain - the growing debt burden increases vulnerability to external shocks, says Elmira Assiaeva. Foreigners can simply start selling off the debt of the States, and then the securities will become worthless.

Photo: TASS/YONHAP

However, there is a consensus in the global economy that no one is interested in a default in the United States, as it entails a significant increase in borrowing costs, independent expert Andrei Barkhota believes. The Federal Treasury and the US Congress are ready to go to great lengths to avoid undesirable consequences. One of these decisions is the approval of an increase in the government debt ceiling, the further growth of which will not be regarded by investors as a fact of default, the expert explained.

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In addition, Donald Trump can really increase budget revenues with his policy, Andrei Barkhota suggested. We are talking not only about trade duties, but also about more complex combinations — for example, the annexation of new territories to the United States within the framework of confederate mechanisms and the "outweighing" of part of the national debt on them.

Photo: TASS/Elena Afonina

As Izvestia wrote earlier, technically speaking, the American authorities can reduce the national debt or at least slow down its growth. Among the options are to increase tax revenues, increase fees, and reduce spending (in particular, on defense, social services, and the state apparatus).

There is no doubt that the problem of the "US default" will be solved again, even at the last moment, Olga Belenkaya from Finam is sure. However, during this period, the volatility of financial markets may increase.