The American economy has a great deal going for it.
Growth is positive. Unemployment is low. Productivity is rising. Oil production is at record levels. Investment in artificial intelligence is enormous. Capital markets, entrepreneurship and innovation remain among America's greatest strengths.
Washington tells a different story. It spends far more than it collects. Debt is extraordinarily high, and interest costs consume a growing share of federal resources. And inflation, though far below its 2022 peak, remains above the Federal Reserve's 2% goal.
President Trump inherited much of that fiscal problem. He should now protect America's economic advantages rather than undermine them through broad tariffs or continued fiscal indiscipline.
How Washington Got Here
America's debt problem was built over decades, under both parties. But the Obama and Biden administrations contributed substantially to its growth.
President Obama inherited the worst financial crisis since the Great Depression, with collapsing revenues and an enormous deficit. That context matters.
According to U.S. Treasury data, debt held by the public rose from about $6.3 trillion in January 2009 to about $14.4 trillion in January 2017. Not all of that resulted from Obama policies. But his administration enacted substantial new spending and tax cuts; the 2009 Recovery Act alone increased deficits by nearly $840 billion, according to the Congressional Budget Office's final estimate.
Under Biden, the American Rescue Plan, enacted in March 2021 as the economy was already recovering, was estimated by CBO to add about $1.9 trillion to deficits.
Inflation then reached its highest level in four decades. Supply disruptions, energy markets and Fed policy mattered. But Federal Reserve Bank of San Francisco research found that pandemic fiscal support—including 2020 relief—may have added about 3 percentage points to inflation by the end of 2021.
The Committee for a Responsible Federal Budget estimates that Biden approved legislation and executive actions adding about $4.7 trillion in net new ten-year debt.
Trump returned in January 2025 to nearly $29 trillion in debt held by the public, deficits approaching $2 trillion a year and inflation still above target.
That inheritance does not excuse what came after. CBO scored the 2025 reconciliation act as adding $3.4 trillion to deficits over ten years—a conventional score that ignores economic feedback and assumes temporary provisions expire.
What Do These Numbers Mean?
The deficit is the gap between what Washington spends and collects in one year. If government collects $5 trillion and spends $7 trillion, it must borrow $2 trillion.
The debt is the accumulated borrowing from years of those deficits.
GDP—gross domestic product—is the value of everything America produces in a year. Comparing deficits and debt with GDP shows how heavy Washington's borrowing is relative to the economy that must support it.
CBO's February baseline, which assumes current law is unchanged, projected a fiscal 2026 deficit of $1.9 trillion—about 5.8% of GDP. Actual results confirm the scale: through August, the deficit had already reached $2.0 trillion.
That is unusually large for a growing economy not fighting a depression, a world war or a pandemic. Deficits averaged 3.8% of GDP over the past 50 years.
An Unusually Large Deficit for Good Times
Federal deficit as a share of GDP
Debt held by the public is projected at about 101% of GDP this year—roughly a full year of national output. CBO projects 120% by 2036, above the previous record of 106% set in 1946.
Debt Is Headed Past Its World War II Record
Federal debt held by the public as a share of GDP
Washington also pays interest on that debt. As older Treasury securities mature, they are refinanced at today's rates. So when rates rise, the entire accumulated debt gradually becomes more expensive to carry. Net interest is about $1 trillion this year; CBO projects $2.1 trillion by 2036.
Don't Miss the Good News
None of this means the economy is failing. Quite the opposite.
Real GDP grew at a 2.1% annual rate in the first quarter and 1.5% in the second, according to the Bureau of Economic Analysis. Unemployment was 4.1% in August, the Bureau of Labor Statistics reports.
Productivity—output per hour worked—was 2.2% higher than a year earlier, according to BLS. That is how living standards rise.
U.S. crude oil production averaged a record 13.6 million barrels per day in 2025, more than any country has ever produced, according to the Energy Information Administration.
The Wall Street Journal reports, in "The Robust U.S. Economy Powers Through Rate Hikes and Rising Bond Yields," that AI-driven growth is shrugging off higher borrowing costs as hiring and manufacturing pick up.
The 10-year Treasury yield recently hit a nearly 20-year high. That can signal trouble, but today's yields partly reflect strength: robust demand, AI firms competing for capital and expectations of a tighter Fed—alongside energy prices and heavy federal borrowing. A strong economy and expensive government borrowing can coexist.
Trump Should Protect Those Advantages
This is where the administration deserves scrutiny.
Consumer prices rose 3.4% over the year to August, BLS reports—much of it from energy, up 16.3% amid the conflict with Iran. Excluding food and energy, prices rose 2.4%.
The Journal's "The Moves That Backfired on Trump and Drove Interest Rates and Inflation Higher" argues that tariffs, the war and immigration limits added to price pressures. That case is plausible, not proven; the article itself notes the AI boom is partly outside Trump's control. Deficits near 6% of GDP during solid growth are not in dispute.
Broad tariffs add another cost. Tariffs of up to 100% on patented medicines and ingredients reach smaller companies on September 29. In "The U.S. Tariff Attack on U.S. Biotech," the Journal's editorial board notes that large drugmakers have mostly negotiated exemptions, while small biotechs rely on contract manufacturers and cannot easily move production home. One says compliance could consume 2% to 4% of its working capital—money not spent on research.
There are legitimate national-security reasons to reduce dependence on China for critical medicines. But targeted measures to secure strategic supply chains are different from broad tariffs that raise costs for American innovators.
The distinction matters: biotechnology, AI, advanced manufacturing and energy are part of the solution to America's fiscal problem, because faster productivity growth expands the tax base.
Trump should protect those industries, not tax their inputs.
Nor should Republicans condemn Biden-era deficits while tolerating large deficits under Republican government. Fiscal discipline has to apply regardless of which party controls Washington.
An Extraordinary Economy—and an Undisciplined Government
The private economy is dynamic, innovative and remarkably resilient. The federal government's finances are not.
Trump inherited the fiscal problems of his predecessors—and an economy of enormous productive potential. Now he owns the choices going forward.
America has tremendous capacity to grow.
Washington needs the discipline to let it.
Sources
U.S. Treasury — Debt to the Penny. Debt held by the public: Jan. 20, 2009; Jan. 20, 2017; January 2025.
fiscaldata.treasury.gov →
Congressional Budget Office — "The Budget and Economic Outlook: 2026 to 2036," February 2026. Deficit, debt, interest and 50-year averages (baseline projections under current law).
cbo.gov →
Congressional Budget Office — "Monthly Budget Review: August 2026." Actual deficit through the first 11 months of fiscal 2026.
cbo.gov →
Congressional Budget Office — Estimated impact of the American Recovery and Reinvestment Act, February 2015.
cbo.gov →
Congressional Budget Office — Estimated budgetary effects of H.R. 1319, American Rescue Plan Act of 2021.
cbo.gov →
Congressional Budget Office — Effects on deficits and the debt of Public Law 119-21, August 2025.
cbo.gov →
Committee for a Responsible Federal Budget — "How Much Did President Biden Add to the Debt?" April 2025.
crfb.org →
Federal Reserve Bank of San Francisco — "Why Is U.S. Inflation Higher than in Other Countries?" March 2022.
frbsf.org →
Bureau of Economic Analysis — GDP (Second Estimate), 2nd Quarter 2026.
bea.gov →
Bureau of Labor Statistics — Employment Situation, CPI and Productivity releases for August / Q2 2026.
bls.gov →
Energy Information Administration — U.S. crude oil production record, 2025.
eia.gov →
The White House — Proclamation adjusting imports of pharmaceuticals and pharmaceutical ingredients, April 2026.
whitehouse.gov →
The Wall Street Journal — Matt Grossman and Sam Goldfarb, "The Robust U.S. Economy Powers Through Rate Hikes and Rising Bond Yields," Sept. 24, 2026.
wsj.com →
The Wall Street Journal — Nick Timiraos and Meridith McGraw, "The Moves That Backfired on Trump and Drove Interest Rates and Inflation Higher," Sept. 27, 2026.
wsj.com →
The Wall Street Journal Editorial Board — "The U.S. Tariff Attack on U.S. Biotech," Sept. 27, 2026 (opinion).
wsj.com →