This may be the maximum level of U.S. debt that’s sustainable before interest payments trigger a default crisis that even steep tax hikes can’t fix
The Penn Wharton Budget Model (PWBM) has identified a potential solvency limit for U.S. debt, estimating it at over 210% of GDP. Beyond this threshold, financing interest payments through feasible tax hikes on labor income becomes impossible, increasing the near certainty of default on Treasury debt or essential transfers like Social Security. While current debt-to-GDP is around 100%, projections suggest it could reach the solvency limit within 14 to 25 years, depending on factors like healthcare cost increases and interest rates. The report highlights that sustained tariffs and a loss of market faith in fiscal sustainability could accelerate this timeline. AI
