At the Lubar College of Business’ April Bradley Distinguished Lecture, Dr. James Poterba, Mitsui Professor of Economics at MIT and President of the National Bureau of Economic Research, offered a clear and compelling analysis of the United States’ growing fiscal challenges. His talk, titled Debt, Deficits, and Sustainability: The U.S. Fiscal Challenge, outlined the history of federal debt, its economic implications and the difficult decisions ahead.
Dr. Poterba warned that the U.S. is on a path to unprecedented levels of national debt, driven by structural deficits, rising entitlement costs and increasing interest payments. “We’ve moved from a period of historically low interest rates into one where the burden of our debt is growing, and growing fast,” he said. “The debt-to-GDP ratio could reach 190% by 2050 if we continue on our current path.”
His lecture included a stark reminder: interest payments on the debt are now one of the fastest-growing parts of the federal budget. “We’re approaching a point where our interest payments may rival or exceed defense spending,” Dr. Poterba said. “That’s a signal of fiscal strain.”
He explained that the rising debt doesn’t just weigh on the federal budget; it impacts the entire economy. “Every extra 10% of debt-to-GDP raises long-term interest rates by about 20 basis points. That means higher borrowing costs for households, businesses, and governments—slowing investment and growth.”
Though the topic was serious, Poterba also offered some optimism. “We’ve tackled deficits before. In the 1990s, a combination of tax increases, spending restraint, and economic growth turned deficits into surpluses. But it took political will.”
Poterba closed by urging action. “This is not an unsolvable problem. But waiting only makes it harder. The longer we delay, the more difficult it becomes to restore fiscal sustainability.”
His clear-eyed and accessible explanation of complex financial issues resonated with the audience of alumni, business leaders, and faculty. His message: Understanding the fiscal landscape is essential—not just for policymakers, but for every American who cares about the country’s economic future.