Should You Worry About U.S. Government Debt? Yes and No.

The first question to ask about any debt is the risk of default. For U.S. government debt, that risk is effectively zero, and reserve currency status is the reason why.

When S&P downgraded U.S. debt from its AAA rating some years ago, Warren Buffett famously argued it should have been rated even higher. His logic: because the debt is denominated in dollars, and the U.S. controls the printing of dollars, default in any traditional sense simply isn’t on the table.

The scale of the market reinforces this. At roughly $32 trillion, U.S. Treasuries make up the deepest, most liquid debt market in the world. Countries running trade surpluses with the U.S. accumulate dollars that need a home, and Treasuries remain the safest, most liquid place to park them. The alternatives are limited: gold has a finite appetite among large institutional holders, and the euro-denominated debt market, while sizable at roughly $14 trillion, is fragmented across multiple issuers, French, German, Italian, and Spanish debt among them, rather than backed by a single, unified borrower the way U.S. Treasuries are.

None of that means the current path is sustainable indefinitely. Every year, deficit spending adds to the total debt, funded by issuing even more of it. As Kurt put it, “check again in 20 years,” the growth in debt over the long term isn’t healthy, even if it isn’t an immediate crisis.

Director of Research Michael Kon laid out three ways this trajectory could realistically change:

1. Growth outpaces debt. This is the best-case outcome: if GDP grows faster than the debt itself, the country effectively grows its way out of the problem. There’s a real case this could happen, in part because AI-driven productivity gains could meaningfully accelerate GDP growth.
2. Inflation erodes the debt’s real value. This is a less favorable path, but not a catastrophic one. If money supply grows faster than debt accumulates, it can shift the debt-to-GDP ratio, though at a real cost to purchasing power. It’s worth noting we’ve already been living with elevated inflation for some time.
3. A crisis forces restructuring. This is the worst-case scenario, the kind of debt haircut that countries like Greece and Argentina have gone through. Both Kurt and Michael consider this extremely unlikely for the U.S., near zero probability in the near term, and low probability even over the long run.

Kurt also pointed out that this isn’t a uniquely American problem. Most foreign governments are managing their own deficits with similar levels of, in his words, “irresponsibility.”

Reserve currency status isn’t just an abstract advantage, it shapes global trade itself. Oil, commodities, and a large share of global trade terms are priced in dollars. That gives the U.S. a genuine privilege: because its debt is dollar-denominated, it will never be forced into technical default, since it can always create the currency needed to service its obligations.

That privilege isn’t permanent by nature. Other countries have held reserve currency status historically and lost it, the United Kingdom being a notable example. But for now, there’s good reason to believe the U.S. can retain it.

Government debt is one of those topics where the near-term and long-term answers genuinely diverge. Today, there’s no meaningful default risk and no reason for immediate concern. Over the coming decades, the trajectory needs to improve, whether through productivity-driven growth, inflation, or policy change, for the current path to remain sustainable.

For now, it’s a trend worth watching rather than worrying about.

This post reflects perspectives shared at Summitry’s Q3 2026 Investor Update. The views expressed are those of the Summitry investment team and are intended for informational purposes only.