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$37 trillion. That’s the staggering headline number for America’s debt—a number that sparks everything from fearmongering to shrugs of indifference. But what’s the real story? Is the US headed for a debt implosion, or is this another case of “crying wolf”?

Financial Sense sat down with James Kostohryz, founder of Investor Acumen and a leading voice at Seeking Alpha, to cut through the noise and explain what actually matters for investors, policymakers, and the American public.

Debt Drama: Why the Extremes Miss the Point

When it comes to US debt, the loudest voices often preach disaster or denial. “You hear one side warning of imminent default or hyperinflation, and another saying debts and deficits don’t matter at all,” Kostohryz observes. “The truth is somewhere in the middle.”

The real key, he says, isn’t the raw debt number. It’s debt as a percentage of GDP—the best measure of the country’s ability to service what it owes. Right now, that figure is about 100% for public debt to GDP (excluding what the government owes itself), which most economists see as serious but not catastrophic.

Can the US Actually Afford Its Debt?

Kostohryz’s analysis is refreshingly clear: the US isn’t on the brink of default, but the path isn’t sustainable forever. “If you want to know when the real trouble starts, it’s when the debt-to-GDP ratio hits 160% to 200%,” he explains. At current deficit levels—running at roughly 6–7% of GDP each year—it would take 20 to 30 years to reach that danger zone.

That means investors have time. “There’s no need to panic and load up on gold or Bitcoin as if a crisis is imminent,” he says. “Markets are forward-looking, but we’re not at the cliff’s edge yet.”

A Sensible Fix—If Washington Can Deliver

So, what would it take to fix America’s finances? Kostohryz runs the numbers:

• A spending cut of about 8% and
• A revenue increase of about 9.65% (raising federal receipts to around 18.75% of GDP, still below the Clinton-era peak)

Spread those changes over 3–5 years, he argues, and the economy would barely notice. “It’s not about slashing Social Security or hiking taxes sky-high. It’s about modest, gradual adjustments—cutting waste, tightening eligibility, using new technology to boost government efficiency, and closing loopholes.”

The Clinton administration managed it in the 1990s, and other developed nations routinely run higher revenue-to-GDP ratios. “If the US can match even part of that, we buy ourselves decades of stability.”

Why Markets Are Already Nervous

While an immediate crisis isn’t likely, the markets are paying close attention. Real interest rates are at a 17-year high, and credit default swap (CDS) spreads for US debt are now higher than Portugal’s—a sign that investors are demanding more insurance against possible trouble. Gold and Bitcoin prices are soaring, not just on hype, but because of real anxiety about long-term US fiscal discipline.

Kostohryz warns that if nothing changes, markets could force Washington’s hand sooner than expected. “If foreign creditors lose confidence, they could start dumping Treasuries, raising borrowing costs and bringing forward the day of reckoning. The spread between 10-year and 30-year US Treasury bonds is already wider than usual—markets are signaling concern about the future, even if the next 5–10 years look stable.”

Can We Really Raise Revenue or Cut Spending?

Skeptics often argue that tax receipts are capped—historically, US federal revenues hover around 17–18% of GDP, regardless of tax rates. But Kostohryz points out that during the Clinton years, receipts briefly hit 20%. “A modest increase to 18.75% of GDP is realistic and not unprecedented. Other advanced economies do even more, though at some cost to growth.”

On the spending side, he suggests targeted, gradual cuts—trimming inefficiency, using AI and better technology in government, and not replacing every retiring worker. “We don’t need to gut entitlements or defense, just manage smarter.”

Bottom Line: It’s Manageable—If We Act

America’s debt situation is serious, but it’s not hopeless, and it’s not yet an emergency. With modest, phased-in reforms—on both the revenue and spending side—the US can stabilize its debt for decades to come. The real challenge is political will, not economic math.

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