American economy and the tools available to policymakers. The U.S. enjoys several structural advantages—such as the global demand for Treasuries, the dollar’s reserve currency status, and the Federal Reserve’s ability to manage liquidity—that make a debt crisis highly unlikely. While rising deficits and interest rates present challenges, the U.S. has ample capacity to manage its debt sustainably, especially if economic growth remains near long-term trends.
However, given the impact of rising debt, increasing deficits, and demographic headwinds (the 3-D’s), which retards economic prosperity over time, Central Banks will continue to suppress interest rates to keep borrowing costs down.