This Investor Says the U.S. “Debt Bomb” Is About to Go Off

By: Alyssa Miller | Published: Feb 10, 2024

The U.S. economy is fighting hard to return to a post-COVID-19 world. While there are some wins, a “debt bomb” is ticking underneath the surface, ready to go off at any moment.

According to hedge fund manager Paul Tudor Jones in a recent interview with CNBC, the investor says the economy is “on steroids” due to massive government spending and borrowing.

What Is the Bomb Ticking Away? 

“We’ve got a 6%-7% budget deficit. We’re fast-pouring consumption like crazy,” Jones told CNBC. Budget deficits are a negative balance between a government’s spending and revenues. When the government spends more than it collects in tax revenues, there is a deficiency.

A man using an ATM on the side of a large stone building in a city

Source: Kaan Keskin/Pexels

The Congressional Budget Office projected Wednesday that the deficit could grow to $2.6 trillion, or about 6% of the U.S. GDP, over the next 10 years.


The Economy Has Grown a Little Bit

The Commerce Department reported last month that the U.S. economy has grown by 3.1 percent in 2023. This is better than the expected performance from some doom-saying analysts.

A stack of U.S. banknotes

Source: Karolina Grabowska/Pexels

There were some concerns about the possibility of stagnant or even negative economic growth in the U.S. Several factors contributed to these concerns. Ongoing challenges like inflation and geopolitical tensions made many fear that 2023 would not grow at all.

U.S. Deficit Narrows Thanks to This

The U.S. deficit is smaller than expected due to spending cuts and a growing economy. A deal that President Biden and congressional Republicans struck last year has helped cut spending back to help save money.

A man in a suit counting money on a black table next to his Macbook and calculator

Source: Kuncheek/Pexels

A surge of 5.2 million new workers entering the labor force has also helped with economic growth and the current deficit.

Debt Relief Sputters

However, the deficit declines are offset by an increase in the estimated budget costs from Biden’s clean-energy agenda, an aging U.S. population, and higher interest rates on the national debt.

Hispanic buyer with plastic card purchasing online on smartphone outdoors

Source: Anete Lusina/Pexels

According to the New York Times, Phillip L. Swagel, the budget office’s director, believes that the decline in deficits is “on track to rack up more debt as a share of its total economic output in 2034 than at any other time in its history.”

How Much Is the National Debt?

At the same time, the U.S. deficit essentially doubled in 2023 to $1.7 trillion. The national debt has just surpassed $34 trillion, which Forbes says is the equivalent to 123% of the total economic output in the U.S.

U.S. banknotes underneath gold coins with large Bs printed on them

Source: David McBee/Pexels

These numbers have others, like Federal Reserve Chairman Jerome Powell, call attention to the growing deficit issue in the U.S.


National Debt Is Growing Faster Than the Economy

Powell told CBS’s “60 Minutes” that the national debt was “growing faster than the economy.” There are several factors contributing to the U.S. debt that is growing, and the budget deficit is one of the most glaring.

Someone on a Macbook while holding a credit card and two receipts

Source: Karolina Grabowska/Pexels

The government spends more money than it collects in revenue each year, creating a deficit. These deficits are financed by issuing debt, leading to an ever-increasing debt pile.


The Debt of the Country Is Increasing

Many analysts believe that the U.S. debt will only grow. According to the New York Times, the U.S. will add another $19 trillion to its national debt over the next decade.

Tall skyscrapers in a city with a grey sky behind them

Source: Expect Best/Pexels

Over the next decade, the mounting costs of an aging population and higher interest expenses continue to weigh on the nation’s fiscal outlook, the nonpartisan Congressional Budget Office said on Wednesday.


U.S. Is Still Spending Money

Lawmakers are also in a debate right now about providing more aid to Ukraine and Israel during their ongoing conflict, and whether or not to expand the child tax credit and restore expired business tax breaks.

A man inside a ATM booth at night

Source: Alexandros Chatzidimos/Pexels

The budget office projected that the annual deficit will grow to $2.6 trillion in 2034 from $1.6 trillion this year.


How Much Will the U.S. Spending Increase This Year? 

This year, the U.S. will spend over $12 trillion just on interest payments for its debt. That’s more money than ever before in the history of the U.S. government.

Three men in suits working on a computers in an office

Source: Kampus Production/Pexels

Think of the U.S. economy as a pie. This year, a huge slice of that pie (bigger than ever!) goes just to paying interest on debt. That means there’s less money left for other things like healthcare, education, or national defense.


The U.S. The Treasury Secretary Isn’t Worried… Yet

U.S. Treasury Secretary Janet Yellen said that she is not worried about the increasing national debt, according to Forbes. The U.S. economy should be alright if there is a check on the net payments made on the debt.

U.S. Treasury Secretary Janet Yellen testifies before the Senate Banking, Housing, and Urban Affairs Committee at the Dirksen Senate Office Building on February 08, 2024 in Washington, DC. The Committee held the hearing to examine the Financial Stability Oversight Council Annual Report to Congress.

Source: Kevin Dietsch/Getty Images

Those payments are projected to rise from 2.5 percent to 2.9 percent over the next years,  according to the Office of Management and Budget.


Jones’s Final Warning

Jones believes that the U.S. could become a strong economy if the government cooled down its spending habits.

Two Brown Credit Cards

Source: Pixabay/Pexels

“The only question is … when does that manifest itself in markets?” he added. “It could be this year, it could be next year,” Jones said to CNBC. Productivity may mask and it might be three or four years from now. But clearly, clearly, we’re on an unsustainable path.”