US debt is now $37tn – should we be worried?

As Donald Trump cheered the passage of his self-styled, and officially named, Big Beautiful Budget Bill through Congress this week, long-sown seeds of doubt about the scale and sustainability of US borrowing from the rest of the world sprouted anew.
Trump’s tax-cutting budget bill is expected to add at least $3 trillion (£2.2 trillion) to the US’s already eye-watering $37tn (£27tn) debt pile. There is no shortage of critics of the plan, not least Trump’s former ally Elon Musk, who has called it a “disgusting abomination”.
The growing debt pile leaves some to wonder whether there is a limit to how much the rest of the world will lend Uncle Sam.
Those doubts have been showing up recently in the weaker value of the dollar and the higher interest rate investors are demanding to lend money to America.
It needs to borrow this money to make up the difference between what it earns and what it spends every year.
Since the beginning of this year, the dollar has fallen 10% against the pound and 15% against the euro.
Although US borrowing costs have been steady overall, the difference between the interest rates paid on longer-term loans versus shorter-term loans – what’s known as the yield curve – has increased, or steepened, signalling increased doubts about the long-term sustainability of US borrowing.
And that is despite the fact that the US has lowered interest rates more slowly than the EU and the UK, which would normally make the dollar stronger because investors can get higher interest rates on bank deposits.
The founder of the world’s biggest hedge fund, Ray Dalio, believes that US borrowing is at a crossroads.
On its current trajectory he estimates the US will soon be spending $10tn a year in loan and interest repayments.
“I am confident that the [US] government’s financial condition is at an inflection point because, if this is not dealt with now, the debts will build up to levels where they can’t be managed without great trauma,” he says.