America faces a 'debt crisis' a lot like the 1980s when a 'private pact' brokered by Ronald Reagan did the trick | Fortune

"The U.S. is perched on a treacherous fiscal ledge. The national debt held by the public has surged past $38 trillion, around 101% of GDP, and is expected to balloon to 120% a decade from now. The country has successfully side-stepped fiscal meltdowns before, but whether the current generation of leaders has the political will to dig itself out of its fiscal hole is up for debate."

"While national debt was once made out to be a long-term issue, not necessarily as urgent as maintaining certain types of spending, it is no longer a distant threat. Earlier this month, the nonpartisan Congressional Budget Office published a sobering outlook for the country's fiscal future. In addition to rising debt, the inflated interest that the U.S. will have to pay annually risks crowding out essential government spending elsewhere, including for Social Security, which could be left penniless within a few years."

"'The debt crisis is already here. If left unaddressed, it will only continue to worsen,' researchers wrote in a report published this week by the Committee for Economic Development (CED), a public policy think tank associated with the Conference Board. That report laid out the increasingly high stakes the nation is facing from its overindulgent borrowing, including risks of crowded-out spending, the diminishing of the dollar's status as global reserve currency, and persistently high interest rates that will inhibit long-term economic growth."

The national debt held by the public has topped $38 trillion, about 101% of GDP, and is projected to rise to roughly 120% of GDP within a decade. The Congressional Budget Office released a sobering outlook showing rising interest costs that could crowd out other government spending. Social Security faces the risk of trust-fund depletion within a few years, potentially forcing automatic benefit cuts. Analysts warn that continued borrowing threatens crowded-out spending, erosion of the dollar's reserve status, and sustained higher interest rates that would suppress long-term economic growth. Historical precedents from the early 1980s show possible policy paths.

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