(Mike Maharrey, Money Metals News Service) The U.S. government is insolvent. This isn’t hyperbole.
In fact, you could call it an understatement.
The Treasury Department recently released its consolidated financial statements for fiscal year 2025. Uncle Sam ended the year with $6.06 trillion in total assets against $47.78 trillion in total liabilities.
For you non-accountants out there – that’s not good.
To put it in simpler terms, the federal government has $7.90 in liabilities for every dollar in assets.
If the U.S. were a private business, it would be in bankruptcy court.
The release of these financial statements got virtually no attention in the mainstream financial media. Forbes was one of the few publications to highlight the numbers. As that report put it, America’s abysmal financial condition was met by “near-total media silence.”
Based on Forbes’s reporting, the U.S. government’s financial position deteriorated by $2.07 trillion in fiscal 2025. The balance sheet now stands at an unfathomable -$41.72 trillion.
Don’t skip over the negative sign. That carries the entire weight of this story.
The federal financial position was further eroded last year by a $2 trillion increase in the national debt and interest expense payable (now at $30.33 trillion), coupled with a $438.8 billion in federal employee and veteran benefits payable.
By the way, this does not include the unfunded liabilities of Social Security and Medicare. I’m not even going to get into that, but ugly is the first word that comes to mind. Unsustainable is the second.
Forbes did a nice job of putting the financial statements into context by dividing each number by 100 million (essentially dropping eight zeros) to make the data comparable to a household budget.
“That household earns $52,446 and spends $73,378 — running a $20,932 annual deficit. Its total liabilities and unfunded promises amount to $1,361,788 against just $60,554 in assets, leaving it $1.3 million in the hole. Uncle Sam, by any accounting standard, is insolvent.”
If you think the word “insolvent” is an exaggeration, just read the definition.
“A financial state where an individual or company cannot meet debt obligations as they fall due (cash-flow) or has liabilities exceeding assets (balance sheet).”
The U.S. government has both.
Forbes argues, “The reckoning, long deferred, is becoming impossible to ignore.”
And yet the mainstream continues to ignore it. As already noted, the Treasury released the data to the sound of crickets.
When we get these shocking reports, a few people sit up and take notice, but most people shrug. They just continue as if everything were fine.
Ladies and gentlemen, everything is not fine.
Sure, from time to time, the media points out the problematic fiscal situation. Sen. Rand Paul, Rep. Thomas Massie, and a few like-minded colleagues bring up the issue in Congress. Democrats sometimes use the national debt as a prop to simp for a tax increase. But that’s about it.
There is no real effort to deal with the fiscal malaise. (No, raising taxes on the rich won’t solve it.) The sad truth is virtually nobody in Congress or the current administration is serious about tackling the root of the problem – government spending.
In fact, spending just keeps going up.
In total, Uncle Sam spent $3.1 trillion through the first five months of fiscal 2026. That was up about 2 percent over the same period in fiscal ‘25.
A 2 percent increase in spending might not sound significant. But weren’t we told there would be spending cuts?
To be fair, there were some cuts.
The increased spending comes despite cuts to the EPA and the Department of Education budget that are now showing up in the data. Lower disaster spending also helped moderate spending levels through the first two months of fiscal ’26.
Looking at the big picture, the spending trajectory is up. Even with all the hype about DOGE and some lip service to cutting spending during the early days of the Trump administration, the U.S. government spent just over $7 trillion last year. That’s an average of $583.3 billion per month or $19.2 billion per day.
And now there’s a war.
Naysayers will read this and say, “Well, Mike, you know you can’t compare a government to a household. After all, the U.S. has a credit card with no real limit, and it can print money. Furthermore, since the dollar is the reserve currency, it can print and borrow to its heart’s content.”
If you’re telling me this to ensure I understand the nuances of government finance, thanks. Got it.
But if you’re saying this just to make America’s fiscal malfeasance seem more palatable, just stop. Anybody with an ounce of sense (and no political axe to grind) understands that the U.S. fiscal situation is unsustainable.
I’m not even talking about something drastic, such as a default. Even if the government can keep kicking the debt can down the road for years, the fiscal situation has ramifications.
First is the interest problem. The massive debt and the relentless deficits are precisely why the Federal Reserve can’t raise interest rates to battle inflation.
Interest on the national debt cost $1.2 trillion in fiscal 2025. That was up 7.3 percent over 2024. Interest is the second-highest spending category after Social Security. The federal government is already spending more on interest payments than it is on national defense or Medicare.
This is one of the reasons why I believe the Fed will continue to cut interest rates this year despite rising CPI and oil price shocks. If they don’t, the Debt Black Hole will eventually suck the life out of the U.S. economy.
That leads to the second problem – who wants to loan the U.S. money?
I’ve written extensively about de-dollarization. America’s fiscal irresponsibility is one of the factors driving the so-called debasement trade. This is reflected in declining demand for Treasuries and rising yields.
Beyond raising interest rates, the central bank will also need to run quantitative easing operations (it already is) to create artificial demand for Treasuries.
Both rate cuts and QE mean higher inflation. And inflation is already on the upswing. (I’m not talking about price inflation – I mean inflation as historically defined as an increase in the supply of money and credit.)
This is the part of the equation that your Modern Monetary Theory (MMT) people and others who pooh-pooh worries about the national debt miss. Sure, the government can print money to its heart’s content. However, it is constantly devaluing the currency to the detriment of its own people. That’s not a sustainable strategy.
And as I’ve said repeatedly, the dollar doesn’t even have to lose its reserve status to create significant problems for the U.S. economy. Even a modest de-dollarization spells disaster. If the world needs fewer dollars, they will begin to return to the U.S., causing a dollar glut. This will increase inflationary pressure domestically as the value of the U.S. currency further depreciates. In the worst-case scenario, the dollar could collapse completely, leading to hyperinflation.
So, go ahead. Act all superior and laugh at Forbes’s unsophisticated comparison between government and household finances. You might be technically correct. But you’re missing the point.
Everything isn’t fine. The debt matters, and those proverbial chickens will eventually come home to roost. Just because it hasn’t caused a problem yet doesn’t mean it won’t.
The problem with playing “kick the can down the road” is that you eventually run out of road.
Mike Maharrey is a journalist and market analyst for Money Metals with over a decade of experience in precious metals. He holds a BS in accounting from the University of Kentucky and a BA in journalism from the University of South Florida.
