World-System (1980-2080) Alternative Forecasts for US CG Debt

May 20, 2026 Is it time to worry about the National Debt?

The US Congress is currently debating a Spending Bill being advanced by the Trump II Administration that will add $2.4 Trillion to the Deficit. In a prior post (here), my model for the US Economy forecasts that Central Government (CG) Debt will decline (the forecast was made after the Trump I Administration). I have also suggested that the outcomes of the Trump Administrations cannot be forecast because they are essentially a random walk (here).

In the graphic above I give four forecasts for US CG Debt (data taken from the World Development Indicators, see the Boiler Plate). The Random Walk (RW) line is meant to show that Debt Shocks (see the Trump I Administration) can happen at anytime in the future and are unpredictable. The prediction driven by the USL20 Model (US, dashed green line) shows the decreasing path of US CB Debt. The prediction driven by the WL20 Model (W, dashed blue line) shows debt peaking around 2050. The Business as Usual Line (BAU) shows debt growing linearly (it actually levels off in 2500).

One point to make is that all these models are stable (largest eigenvalue < 1.0)**. This means that none of my models predict that US CG DEBT is out of control or will grow forever (uncontrolled exponential growth). However, other Econometric models (for example, the Penn-Wharton Budget Model, PWBM) forecast that the US has about 20 years before Debt levels become unsustainable.

My best guess? Given that my forecasting models are stable and that the Trump Shocks will eventually be history, it seems reasonable to project that US CG Debt will keep pace with growth in the US Economy and will eventually stabilize when economic growth is over (see my forecasts for US  Economic growth here).

NOTES

** All my models are estimated from historical data and are not assumed, prior to estimation, as either stable or unstable (as are most Economic Models). For more information about the models I use and data sources, see the Boiler Plate.

I analyze the causes of the US CG Debt Bubble in another post.

World-System (1990-2060) Globalization and Trump II Tariffs

 

The Trump II Administration announced today (here) that it is imposing stiff tariffs on goods from Mexico, Canada and China because "...they haven't treated us fairly on trade...". The Wall Street Journal (here) is calling the move "...the dumbest trade war in history...". Other than the Trump II administration breaking decisively with Neoliberalism (free trade and Globalization were key elements of Neoliberal orthodoxy), what is going on here?

Let's first look at the state of Globalization among the trading partners (US, CN, CA, and MX) using the KOF Index of Globalization. The dominant state variable attractor path for the trading system is displayed above as being driven by the USL20 model. From 1990 to 2000, the system had its ups and downs but did stay pretty much within the 98% prediction intervals for the attractor path. In 2010, the system was right on the attractor path. After that, the US-dominated system is predicted to peak somewhere around 2040. Trump is throwing a tariff-wrench in the system and, as with prior swings in Globalization, the policy may have little impact and we can expect a return to the attractor path after Trump II is gone.

But, does Trump understand that the Globalization system is reaching a peak and might well collapse in the future? Is Trump attempting to pull globalized US industries back on-shore before system collapse? Trump claims to act intuitively and his ample gut might tell him that the global World-System is collapsing. At this point, my goal is to get a stake in the ground to understand what has happened after the Trump II Administration is over.

Notes

The Measurement Matrix for this KOF Index of Globalization system is presented above. KOF1=overall growth, KOF2 is dominated by the US and KOF3 is dominated by Canada. All look at KOF2 and KOF3 in future posts.