Goldman Sachs warns: US debt is approaching the peak of "World War II", and failure to act risks the worst austerity in history

Goldman Sachs said Mr. Trump's spending plans would not stop the US national debt from climbing to "unsustainable" levels, second only to those of the second world war. The US will have to pay $1 trillion in interest on $36 trillion next year, more than the combined cost of health insurance and defence. Economists at Goldman Sachs have warned that if US lawmakers delay tackling the deficit, future crises may need to be averted through unprecedented fiscal austerity.
Goldman Sachs' Manuel Abecasis, David Mericle, and Alec Phillips pointed out in a report on Tuesday that while the spending bill passed by House Republicans, combined with an increase in tariff revenue, would slightly reduce the budget deficit without accounting for interest payments, the bill's impact on the overall deficit was largely unchanged given rising borrowing costs.
"The current path remains unsustainable - primary deficits are well above normal even in a strong economy, the debt-to-GDP ratio is approaching its post-second world war peak, and soaring real interest rates have driven debt and interest payments to GDP much faster than expected in the last cycle," the report stresses.
The size of future debt will depend heavily on interest rates over the next two decades, according to Goldman Sachs. At present, the US Treasury has to borrow new debt to repay the growing interest rate. The US Treasury's interest expenditure will reach $1 trillion next year, making it the second largest government expenditure after Social Security, according to data from the Committee for a Responsible Federal Budget, a think-tank.