‘Death by a Thousand Cuts’: Deutsche Bank Sees Grim Outlook for U.S. Economy as Debt Tops $36 Trillion

Deutsche Bank Warns U.S. Economy Faces ‘Death by a Thousand Cuts’

The U.S. economy is teetering under the pressure of mounting national debt, now exceeding $36.2 trillion, raising alarm among economists and credit rating agencies. Deutsche Bank’s Jim Reid described the situation as a “death by a thousand cuts,” according to Fortune, signaling that the nation may be inching dangerously close to unsustainable fiscal territory.

Last week, Moody’s downgraded the U.S. credit rating from Aaa to Aa1, citing that although “the US’ significant economic and financial strengths” remain, they “no longer fully counterbalance the decline in fiscal metrics.” This decision further reflects fears that economic growth may no longer be able to keep up with ballooning debt and rising interest payments.

In this photo gallery, we break down what rising debt and a credit downgrade mean for the U.S. economy. Kaboompics.com / Pexels

Treasury Plays Down Downgrade as Fiscal Warnings Intensify

Treasury Secretary Scott Bessent attempted to downplay the downgrade, but market sentiment appears increasingly unsettled. Reid noted in a statement to Fortune, “It keeps the drip, drip, drip of poor fiscal news building up against the debt sustainability dam in the background.” Josh Morgan-USA TODAY

Trump Floats Visa Revenue and Pushes Tax Cuts to Address Debt

President Trump has acknowledged the issue, floating the idea that revenue from his “gold card” visa scheme could help pay down the debt. Simultaneously, his administration is pushing for a sweeping tax cut bill, which includes an extension of the 2017 tax cuts set to expire in 2025, and new exemptions for tips and overtime pay. Trump has described the proposal as a “big, beautiful bill.” Gage Skidmore / Wikimedia

CBO: Tax Cuts Could Push U.S. Debt to 220% of GDP by 2055

While the administration argues that these cuts will stimulate growth and improve the debt-to-GDP ratio—with projected real GDP increases of up to 3.8% in the short term—the Congressional Budget Office warns otherwise. A recent CBO report predicts that if the tax cuts are extended without other fiscal changes, the public debt could soar to 220% of GDP by 2055, far above current projections. Tumisu / Pixabay

Fed Could Intervene if Bond Market Reacts to Credit Downgrade

Fortune reported that it had received a note from UBS Chief Investment Officer Mark Haefele, who called the Moody’s downgrade “a headline risk rather than a fundamental shift,” adding, “We would also expect the Federal Reserve to step in if there were a disorderly or unsustainable increase in bond yields.” Should investor confidence falter, analysts believe the Federal Reserve could step in through quantitative easing to stabilize bond markets. AgnosticPreachersKid / Wikimedia