Bugle Notes Podcast: EP 7 - The Great American Debt Crisis

Imagine standing on a beach, skies calm, while news reports warn of a hurricane rapidly approaching. That’s how many Americans feel today about the country’s ballooning national debt. On the surface, daily life feels normal — bills are paid, the economy hums along — yet beneath it all is a fiscal storm building strength.

In our latest episode of Bugle Notes, our investment committee joined Patrick Hill, Partner of our Ocala office, to dissect what may be the greatest economic threat of our generation: the national debt crisis. In this article, we break down the episode’s key insights, so you can understand what’s at stake and how Reveille Wealth is preparing clients to navigate uncertain terrain.

Understanding the Debt: A Nation Living Beyond Its Means

At the heart of the crisis is a staggering budget imbalance. According to the 2023 Financial Report of the United States Government, in 2023 the U.S. government spent nearly $7.9 trillion — while collecting just $4.5 trillion in total revenue. That left a net operating loss of $3.4 trillion, or roughly $21 billion a day in overspending.

This isn’t a partisan issue. Both major political parties have contributed to the problem over decades. And while lawmakers debate over spending cuts or raising taxes, the numbers tell a clear story: this fiscal trajectory is unsustainable.

The Federal Reserve and Interest Rates: A Dangerous Feedback Loop

From March 2022 to mid-2023, the Federal Reserve raised interest rates from near-zero to 5.5%, in an effort to curb inflation. While this was necessary for price stability, it has had dire consequences for debt servicing costs.

When the government holds over $30 trillion in debt, even a modest increase in rates can result in hundreds of billions in additional interest on the national debt. These interest payments are now one of the fastest-growing budget line items, further straining our fiscal position.

Worse still, most of this debt is short-term. That means the Treasury must frequently refinance it — now at much higher rates — compounding the problem further.

Debt to GDP Ratio: A New Threshold of Risk

The America debt to GDP ratio — a measure comparing national debt to the country’s total economic output — has surged past 120%. Historically, ratios above 90% have signaled declining growth prospects. For comparison, our current debt load exceeds the combined GDP of Germany, Japan, the UK, India, and Canada.

The government's own financial report projects that if current trends continue, total U.S. liabilities (including unfunded promises) will exceed $120 trillion within 75 years — a level considered unmanageable by most economists.

Social Security Insolvency: A Crisis Within the Crisis

Social Security and Medicare are two of the largest drivers of future deficits. According to the Treasury’s 2023 financial report, Social Security alone is expected to add another $25.2 trillion in unfunded obligations over the next 75 years. Medicare? Over $53 trillion.

That’s on top of the existing $43 trillion in liabilities already on the books.

The harsh reality is that Social Security insolvency is a real threat within our lifetimes. Without changes, the system may not be able to pay full benefits — forcing painful choices like raising the retirement age, cutting benefits, or increasing payroll taxes.

Can We Cut Our Way Out of the US Fiscal Crisis?

Cutting government spending by 26% across the board could, in theory, close the budget gap. But that’s unlikely. If we exempt politically untouchable programs like defense, veterans’ benefits, Social Security, and Medicare, then all other programs would need to be cut by over 85% — an impossibility.

This highlights the reality of the US fiscal crisis: it’s not just about wasteful spending. It’s about structurally imbalanced obligations that can't be resolved through spending cuts alone.

The Way Forward: Austerity, Inflation, or Innovation?

The federal government has two main paths:

• Austerity: Slash spending and raise taxes — politically toxic and economically painful.

• Inflation: Print more money to devalue the debt — potentially destroying the U.S. dollar’s purchasing power and global trust.

There is a third, more hopeful path: innovation and adaptive investment strategies. By dynamically responding to changing markets, investors may not only weather this storm but also find opportunities amid the chaos.

How Reveille Helps Clients Navigate the Uncertainty

At Reveille Wealth Management, we use a rules based investment discipline designed to adapt to volatile markets. This approach can help clients avoid major losses and position them to capitalize when markets rebound.

We believe that while the national debt crisis is real, it’s not the end of the American economy — but it may be the end of doing business the old way. Investors who cling to outdated models like "buy and hold" may find themselves vulnerable. But those who plan ahead and embrace flexibility can emerge stronger.

Ready to help protect and grow your financial future? Contact a member of our team today to schedule a conversation.

---

Disclosures:

This content has been partially prepared by Arm Communicators, LLC, an independent third-party.

The information provided has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. The opinions expressed are those of Reveille Wealth Management and not necessarily those of Raymond James. Expressions of opinions are as of this date and are subject to change without notice. Investing involves risk and you may incur a profit or loss regardless of strategy selected.