Deficit dangers for American families

[UNITED STATES] As the U.S. federal deficit continues its upward climb, concerns are mounting over how this fiscal trajectory could impact American households. With the national debt now exceeding $36 trillion—about $106,000 per citizen—and projected to rise sharply in the coming years, experts warn that the consequences will ripple through the economy, affecting everything from job opportunities to household budgets.

Defining the Deficit: What’s at Stake?

The federal deficit is the annual gap between government spending and revenue. When deficits persist, they accumulate into the national debt—the total amount the government owes its creditors. In 2025, the Congressional Budget Office (CBO) projects a federal deficit of $1.9 trillion, with debt held by the public reaching 100% of GDP and climbing to 118% by 2035. This trend is driven by rising mandatory spending, interest costs, and tax policies that have expanded deficits in recent years.

Direct Impacts on American Households

Higher Interest Rates

As the government borrows more to finance its deficits, it competes with businesses and consumers for credit. This increased demand can push up interest rates on mortgages, auto loans, and credit cards, making borrowing more expensive for families. By 2035, interest costs on the national debt are projected to reach $1.8 trillion annually, surpassing spending on defense, education, and transportation combined.

Reduced Government Benefits

To manage ballooning deficits, lawmakers may be forced to cut spending on vital programs such as Medicaid, SNAP (food assistance), education, and infrastructure. Recent legislative proposals have included significant reductions to these safety nets, disproportionately affecting lower-income households. For example, a House-passed reconciliation bill would result in the lowest-income households losing about $820 in 2026 due to cuts in Medicaid and SNAP, while the wealthiest 10% would receive about 70% of the legislation’s total value.

Potential Tax Increases

Another tool to address deficits is raising taxes. Higher taxes reduce disposable income, leaving families with less money for savings, investments, and daily expenses. While tax cuts have been extended for higher earners in recent bills, there is growing pressure to increase revenues in the future, which could impact a broader swath of taxpayers.

Crowding Out Private Investment

Large federal deficits can “crowd out” private investment by absorbing capital that could otherwise fund business expansion, innovation, and job creation. This dynamic is expected to reduce private investment by 13.6% by 2035, contributing to slower economic growth and fewer employment opportunities.

Lower Wages and Job Losses

Projections show that, compared to a scenario where debt is stabilized, the current path will reduce U.S. GDP by $340 billion in 2035 and eliminate 1.2 million jobs. Wages are also expected to decline, with take-home pay falling by 0.6% in 2035 and by more than 5% by 2075 if current trends continue.

Market Volatility and Economic Instability

Growing deficits can undermine confidence in the U.S. dollar and increase market volatility. Credit rating agencies have already downgraded U.S. government debt, signaling concerns about America’s ability to manage its obligations. This instability can affect retirement accounts, stock portfolios, and overall household wealth.

Who Is Most at Risk?

The negative effects of rising deficits are not distributed equally. Analyses show that lower- and middle-income households are more likely to experience reduced benefits and slower wage growth, while the wealthiest households benefit from recent tax policies. By 2033, the lowest-income households could be 4% worse off financially, while the top 10% could see gains of 2%.

The Broader Economic Picture

Persistent deficits also limit the government’s flexibility to respond to future crises, such as recessions or public health emergencies. High debt levels mean less room for emergency spending and a greater risk of fiscal crises, which could further erode economic security for American families.

What Can Be Done?

Experts argue that comprehensive fiscal reforms—such as a balanced mix of spending cuts and revenue increases—are needed to stabilize the debt and protect economic opportunities for future generations. Without decisive action, the burden of rising deficits will continue to fall on households through higher costs, reduced services, and diminished economic prospects.

The growing U.S. deficit is more than a distant government statistic—it is a looming threat to the financial well-being of American households. From higher interest rates and reduced benefits to lower wages and increased economic uncertainty, the impacts are far-reaching and intensifying. As policymakers debate the path forward, the stakes for American families have never been higher.