Written by Liam Bendall
One hundred trillion U.S. dollars is a figure so vast it defies comprehension. With that amount, you could buy Amazon 47 times over. You could end world hunger several times over. What may shock you, however, is that figure is roughly the equivalent of the combined government debt worldwide (International Monetary Fund, 2024).
Poor fiscal management and economic policies around the world have created an economic time bomb that could do more damage than any conventional missile. Among the chief contributors to this public debt are the United States with $36.2 trillion U.S. Dollars (Newsweek, 2024), Japan with $9.91 trillion U.S. dollars as of 2023, (Statista, 2024) and China with $18.82 trillion U.S. dollars (Statista, 2024).
Debt to GDP (Gross Domestic Product) — the comparison between how much a government owes compared to how much money it makes per year — is rising at dangerous rates. Current estimates suggest global debt to GDP will reach 95% by the end of this year (International Monetary Fund, 2024), a warning sign the world can no longer ignore.
The evidence is overwhelming – barring few exceptions, the world is suffering from a debt crisis. We’ve already seen some of the fallout from this in the form of spiking inflation, rising interest payments, and higher interest rates, all of which weaken economies and lower standards of living for the average person. But in economic terms, these are merely small tremors compared to what could happen if this debt trend continues.
The debt explosion is largely the result of poor fiscal policy, aging populations and stagnant economies.
On top of wasteful spending, budget deficits – where a government spends more than it generates – are becoming more common. In 2023, Spain recorded a budget deficit equivalent to 3.60% of GDP (Trading Economics, 2024), New Zealand recorded a budget deficit equivalent to 2.40% GDP (Trading Economics, 2024), in the same year, and in 2024, the United Kingdom recorded a budget deficit equal to 4.80% of GDP (Trading Economics, 2024). Naturally, government deficits increase debts as borrowing is the only way to pay for the budget.
These deficits are not only the fault of poor fiscal policy. External shocks like the COVID-19 pandemic and demographic pressures from ageing populations have contributed to budget deficits through weakening economies. However, poor fiscal polic,y like government overspending and reckless tax cuts, are worsening an already dire situation.
Irrespective of the cause, budget deficits are unsustainable. If a business had budget deficits, it would either make dramatic changes or eventually collapse. Governments are no different and should not pretend to be. Picture it like dealing with a flood, you cannot clear the floodwater before stopping the flooding itself. Short-term cuts to expenditure like military, foreign aid, or welfare are not ideal, but the alternative will have worse consequences for any country in the long term. Until there’s enough economic growth to bridge the deficit, sacrifices will have to be made.
As mentioned earlier, ageing populations are worsening the debt crisis. With more elderly to support and fewer working-age individuals to contribute to the economy, the tax base is shrinking while its burden is increasing. On the current path, economic growth will be stunted and the ability to pay off debt will be dramatically reduced.
Take France as a case study. Like many developed nations, France’s population is aging rapidly. This demographic shift has pushed the dependency ratio to 62.69% (Trading Economics, 2025), meaning there are over 62 people dependent on the government for every 100 working-age individuals. This ratio is expected to rise further in the coming years as the population continues to age, worsening the fiscal strain. With fewer people in the workforce, the pool of taxpayers shrinks, directly undermining government revenue. At the same time, the growing elderly population increases demand for pensions, healthcare, and other social services, placing additional burdens on public spending. France’s government debt is projected to reach 116% of GDP by 2025 (European Commission, 2025), and interest payments alone are expected to consume about 2.5% of the government’s budget (Diakowska, 2023). This leaves less fiscal space for investment in growth-enhancing sectors like infrastructure, education, or innovation. France is not unique in this crisis, as spending obligations outpace government revenue, debt will continue to spiral out of control.
In a worst-case scenario, countries may default on debt —the economic equivalent of jumping off a cliff. In 2022, Sri Lanka defaulted on its debt because it couldn’t service $51 billion U.S. dollars worth of loans. Credit ratings collapsed, making borrowing almost impossible and expensive. International investors sold off government bonds, which dramatically reduced the value of the currency. The Sri Lankan Rupee lost more than 80% of its value compared to the US dollar between March and September 2022 (Diakowska, 2023). Consumer price inflation surged to over 70% in September 2022 (Diakowska, 2023), which was among the highest rates of inflation worldwide. Even two years later, almost a quarter of the population lives in poverty (Aliasger, 2025). Sri Lanka’s economic nightmare serves as a warning for what could happen worldwide if the current trajectory continues.
Economic turmoil can allow otherwise reviled groups and ideologies to take power. Nazi Germany and the Soviet Union, two of the most murderous regimes in modern memory, gained power primarily because of economic crises (Encyclopaedia Britannica). In Germany, the Great Depression caused mass unemployment and hyperinflation, which devastated the country. This made Germans desperate enough to turn to the Nazis, in the hope of economic revival. Once in power the Nazis launched the Second World War and enacted the holocaust which caused between 70-85 million deaths worldwide (Statista). Similarly, the First World War had compounded already abysmal living conditions for the Russian peopl,e which triggered the revolution that ended with the formation of the Soviet Union. Atrocities were soon to follow, with man-made famines in Ukraine killing at least 3.5 million people (University of Minnesota), and millions elsewhere confined to brutal labor camps (EBSCO).
Impoverished people will turn to any alternative, no matter how ruthless, if there is any hope of salvation. It is true that liberal democracies improve economies because people have the freedom to build businesses or seek education and fulfil high-skilled jobs. An economic study from MIT reveals democratic countries experience a 20% increase in GDP over a 25-year period compared to authoritarian states.
But it is equally true that liberal democracies cannot survive without economic prosperity – because quality of life will always take precedence over personal liberties.
Dramatic action is needed to take control over the debt crisis. Only economic growth combined with fiscal responsibility can shield societies from the consequences of uncontrolled debt. Fiscal weaknesses exist on all sides of the political spectrum.
Right-wing political parties risk adding enormously to the debt through vast and expensive tax cuts. In the United States, the Republican administration is pushing to pass huge tax cuts (Picchi, 2024, CBS) which could add trillions to the American national debt. Former Prime Minister of the United Kingdom, Liz Truss attempted to pass $45 billion worth of unfunded tax cuts (Perraton, 2024). The result was market chaos, and Truss was forced to resign as the shortest-serving UK Prime Minister ever. The argument in favour of these tax cuts would be that the ensuing economic growth would compensate or even exceed any additions to public debt. Tax cuts leave more money for investments to start new businesses or expand existing ones. This increases employment, creates new incomes and improves productivity. Subsequently, the economy grows, which increases tax revenues. Tax cuts leave more money for investments to start new businesses or expand existing ones. This increases employment, creates new incomes and improves productivity. Subsequently the economy grows which increases tax revenues. Perhaps if the debt was minimal the argument could have some validity. Economic growth can offset losses in tax revenue, overcome the incurred debt and make the country wealthier in the long term. However, huge tax cuts are not guarantors of enough economic growth that can overcome the debt. Other factors like productivity, market stability and regulatory environment are also vital for economic growth. Unpredictable events like Covid-19 can destroy economic growth which leaves any country vulnerable to debt incurred by such tax cuts. Due to the enormity of debt that these countries have, gambling on tax cuts is reckless and risks worsening an already dire situation.
Equally problematic, left-wing political parties risk overspending beyond what their economies can handle. The previous New Zealand Labour government increased public spending by $29.7 billion (Wilkinson, 2023), which was far more than their planned $11.7 billion (Wilkinson, 2023) increase even prior to the Covid-19 pandemic. A study from the National Bureau of Economic Research revealed left-leaning governments face higher borrowing costs and greater debt, which is attributed to greater spending.
On top of stopping the debt increasing, governments need to focus on creating the necessary conditions for the economy to improve. When the economy grows, people spend more, businesses generate more revenue and by extension governments collect more in taxes. This allows them to reduce borrowing or pay down existing debt. It also boosts investor confidence which encourages investments and creates more job opportunities for the public.
Cutting unnecessary spending, giving tax cuts where possible and removing unnecessary regulations are ways to enhance any economy. Reducing government spending reduces the amount of money in an economy which helps limit inflation. Targeted tax cuts that are financially possible leave more money for people to spend and businesses to invest, naturally increasing economic growth. Ideally a combination of the two, where cuts in spending cover specific tax cuts can both enable growth and financial stability. Reforming and streamlining regulation cut costs and enables business freedom. In the UK, economists estimate that regulations imposed from 2015 alone could cost as much as £143 billion (Growth Commission, 2023). Some regulations are needed for areas like workers’ rights and to protect consumers from below par safety standards or fraud. However, overregulation burdens businesses with additional costs and slows down growth. Domestic industries also need a strong regulatory environment to compete in international markets.
During the 1920’s President Harding and President Coolidge cut spending and taxes, which contributed to economic growth without incurring significant debt. President Harding cut the federal budget from $6.3 billion U.S dollars to $3.22 trillion between 1920 and 1922 (Texas Public Policy Foundation, 2022). President Coolidge was the Vice President during this period and continued the same policies after President Harding. When President Coolidge took office in 1923, the federal budget was $3.14 billion U.S. dollars and when he left it was $2.96 billion U.S dollars in 1928 (Texas Public Policy Foundation, 2022). Spending and taxes were cut around 50% and 30% of the national debt was paid off (Powell, 2010) during the 1920s. The result was the famous Roaring Twenties. Gross national product grew 4.7% annually and unemployment fell from 6.7% to 3.2% (ITR Foundation, 2018). Real earnings of employed wage earners increased by 22% and the index of industrial production climbed 70% (Library of Congress).
America’s overcoming of public debt in the 1920s is a model that the world today can follow. A combination of fiscal responsibility and pro-economic growth policies can overcome the challenges we face with national debt today.
References
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