The Lessons from History: What underpins America’s Success?

Research evidence excerpt

The Lessons from History: What underpins America’s Success?

24 June 2026

Thematic Research

The US fiscal trajectory is the most plausible catalyst to accelerate that erosion,

and for institutional investors is the single most concrete macroeconomic risk

facing the United States. Over the last four years since 2022, the federal deficit has

been consistently running at around 5-6% of GDP. Those are the highest peacetime

deficits in US history outside of a major recession, and this is happening in a full-

employment economy. Debt held by the public is set to surpass 100% of GDP this

year, and the CBO projections point to an unsustainable trajectory. Interest

payments on the federal debt now exceed defence spending and are the fastest-

growing line item in the budget.

Most significantly, the binding constraints are now set to arrive within the next

decade. The latest estimates project that the Social Security trust fund will be

depleted by late 2032, which would trigger an automatic benefit cut absent

legislative action. The Medicare hospital insurance trust fund faces a similar

reckoning shortly after. So while the unsustainability of the US public debt

trajectory has been in the headlines for many years, these events are now more

imminent – ones that the next US administration that takes office after the 2028

election will have to face.

To be fair, the fiscal challenge is far from arithmetically catastrophic – a combination

of AI-driven productivity growth and moderate fiscal consolidation could lead to

significant improvements in the long-term debt profile. The difficulty is whether the

political system can deliver such an outcome. Past fiscal consolidations required

bipartisan compromise. Yet the current political environment offers little prospect