Government Debt Warnings From the Enlightenment Are Landing

The government debt warnings issued by Scottish Enlightenment thinkers in the 1750s were mocked for two centuries. The numbers now arriving from the IMF, Fitch Ratings and the Federal Reserve Bank of St. Louis suggest those philosophers may simply have been early.

Government Debt Warnings That Proved Premature — Then Prescient

The intellectual case against public borrowing was well-formed long before the data caught up with it. David Hume, writing in his 1752 essay Of Public Credit, warned that bond markets allowed politicians to behave extravagantly without immediately raising taxes. ‘The practice, therefore, of contracting debt will almost infallibly be abused, in every government,’ he wrote. Adam Smith argued that long-dated public debt ‘has gradually enfeebled every state that has adopted it… When national debts have once accumulated to a certain degree, there is scarce, I believe, a single instance of their having been fairly and completely paid.’ Adam Ferguson called a permanent national debt ‘to be reckoned among the causes of national ruin.’

Thomas Babington Macaulay, writing in 1848, found all of this rather amusing. Britain’s debt kept growing, he observed, yet ‘bankruptcy and ruin were as remote as ever.’ His rebuttal had real force: most of Britain’s debt was held domestically, economic growth kept the burden manageable, and fixed-interest perpetual bonds shielded the sovereign from interest-rate volatility. The pessimists, Macaulay said, ‘greatly overrated the pressure of the burden; they greatly underrated the strength by which the burden was to be borne.’

Those stabilising conditions have eroded. Economic growth across the developed world has slowed. The maturity structure of debt has shortened. And the trajectory of the numbers has turned in a direction the optimists did not anticipate.

What the Current Figures Say

Global public debt stood at $98 trillion, or 94% of GDP, in 2023, according to the IMF’s 2024 Global Debt Monitor. By 2024, UNCTAD put the figure at a record $102 trillion, the first time it had cleared $100 trillion. The IMF’s April 2026 Fiscal Monitor projects that ratio will reach 100% of GDP by 2029, one year earlier than previously forecast.

The US figures are sharper still. Fitch’s August 2024 affirmation of the US at ‘AA+’ put general government debt at 114% of GDP at end-2023, with a forecast of 124.4% by end-2026. The St. Louis Fed’s FRED database, drawing on Office of Management and Budget data, puts federal debt at 122.59% of GDP for Q1 2026. In a special report published 30 April 2026, Fitch projected US general government debt above 120% of GDP by 2027, with the annual deficit running at 7.9% of GDP in both 2026 and 2027. The agency also flagged that Social Security and Medicare trust funds are projected to be depleted within a decade.

Economists Carmen Reinhart and Kenneth Rogoff identified 90% of GDP as the threshold at which government debt begins to weigh on growth. The US cleared that level years ago. The outer boundary, according to the Penn Wharton Budget Model, is roughly 210% of GDP, beyond which debt becomes rationally unsustainable. Under scenarios incorporating historical healthcare cost growth, that limit could be reached within 20 years, with a 25% probability of arriving in 14.

Maturity structure compounds the problem. Econofact, drawing on Treasury data, puts the weighted average maturity of US borrowing at roughly five years since 1980, edging closer to six years since 2020. Macaulay’s Britain financed itself with fixed-interest perpetual bonds and was largely insulated from rate moves. The US, by contrast, must constantly refinance at whatever rates the market demands. When short-term rates rose sharply four years ago, the interest burden on Washington’s $40 trillion in outstanding borrowing became a live fiscal constraint rather than a theoretical one. Historian Niall Ferguson has observed that great powers show their decline when debt-service costs exceed defence spending. The US crossed that threshold two years ago.

Hume saw this end-state clearly enough: he expected overburdened governments to short-change bondholders not through formal default but through inflation and financial repression. Since modern governments issue debt in currencies they control, formal default is optional. The slow erosion of real returns is not. ‘The natural death of public credit,’ Hume wrote, is inevitable when the state is ‘overbalanced by a great debt.’

Macaulay was right that the pessimists misjudged their timing by a century or more. The question now is whether the structural supports he relied upon, growth, domestic ownership of debt, and long-duration financing, remain intact. On current projections, the answer is increasingly no. The next test is whether any major sovereign actually moves to consolidate, or whether the drift continues until the bond market forces the issue.