Benjamin Franklin famously observed that “in this world nothing can be said to be certain, except death and taxes.” If he were alive today, he might be tempted to add “national debt” to that short list. The debate is loud and ongoing: some argue the U.S. national debt has reached unsustainable levels, while others insist we can simply print more money. Regardless of where one lands, the numbers deserve serious attention.
National debt reflects the total amount the federal government owes. Twenty-five years ago, that figure stood near $6 trillion. Today, it is approaching $39 trillion. Annual federal spending is nearly $7 trillion, while revenue is closer to $5 trillion, leaving persistent deficits that could run near $2 trillion per year well into the future. Those gaps matter because borrowing to fund them has consequences.
One concern is interest rates. As debt grows, investors may demand higher yields to compensate for increased risk. If rates rise meaningfully, individuals and businesses could face higher borrowing costs. That pressure could worsen challenges in the housing and mortgage markets, where affordability is already strained. Higher rates often go hand in hand with higher inflation, which erodes purchasing power and complicates long-term planning.
Inflation also affects markets. Future business earnings become harder to predict when inflation is volatile. A company valued in a stable 2% inflation environment is typically worth more than the same company facing 10% inflation. When business values fall, stock prices often follow. Elevated rates can further slow economic activity, increasing the risk of recession. This is not politics; it is economics, and for many, it is deeply personal.
From a retirement perspective, the stakes are high. How do we afford to shore up Social Security or control healthcare costs if government spending remains unchecked? Sustainable growth may be our best hope. An economy growing at least 2% annually—ideally closer to 3%—helps generate revenue without relying solely on borrowing.
So, what should savers and investors consider over the next three to five years? Those expecting higher inflation often favor borrowing at fixed rates and investing in assets that may better hold value over time, especially those that generate income through dividends, interest, or rent. That approach can help, but it is never guaranteed, regardless of past performance.
Others may prefer holding cash to avoid market volatility. Yet cash loses purchasing power during inflationary periods. Diversification remains essential. Some may also explore principal-protected strategies, such as fixed interest or fixed indexed annuities, where an insurance company’s financial strength backs principal and offers a fixed return or the potential for indexed growth. These options can provide income while aiming to preserve capital.
At the national level, we should urge our representatives to confront deficits with bipartisan resolve—at minimum, cutting them in half. Long-term prosperity depends on growth driven by productivity and innovation, not endless borrowing. Can we reduce the overall cost of government? Can we responsibly address entitlement spending? These questions matter.
Individually, the guidance is clearer: stay diversified, protect what you have saved for retirement, pay down non-mortgage debt, and—if possible—keep working while you have the ability and opportunity. Prudence today can help weather uncertainty tomorrow.
