When Does Federal Debt Reach Unsustainable Levels?

Penn Wharton University of Pennsylvania

PWBM estimates that—even under myopic expectations—financial markets cannot sustain more than the next 20 years of accumulated deficits projected under current U.S. fiscal policy. Forward-looking financial markets are, therefore, effectively betting that future fiscal policy will provide substantial corrective measures ahead of time. If financial markets started to believe otherwise, debt dynamics would “unravel” and become unsustainable much sooner.