US debt interest costs mattered more than the total after borrowing reached $40 trillion, Kasey McCurdy, chief portfolio strategist at Schwab Wealth Advisory, said in remarks published Oct. 22.
Economic growth helps determine whether the government can sustain those payments. McCurdy distinguished the approaching deadline to raise the federal borrowing limit from budget problems that stretch over many years.
Speaking on Charles Schwab's WashingtonWise podcast, carried by Schwab Network, McCurdy said the size of the debt alone did not establish when a crisis would occur.
“There's no real magic debt level that automatically triggers a crisis,” he said.
He described the borrowing deadline and the longer fiscal outlook as “two clocks” running at the same time. One concerns Congress's authority to permit more borrowing, while the other concerns the government's ability to carry its debt.
The federal debt crossed $40 trillion in August, while the annual budget deficit approached $2 trillion, according to Schwab Network. The debt ceiling, the legal limit on total federal borrowing, stands at $41.4 trillion.
Congress set that limit in last year's One Big Beautiful Bill. Economists expect borrowing to reach it by mid-2027, putting a decision on raising the ceiling before the next Congress.
Raising the ceiling permits additional borrowing. It does not itself reduce the existing debt or resolve the gap between government spending and revenue.
McCurdy put greater weight on changes in the budget, interest payments and the relationship between borrowing and economic growth. Those measures matter more to the longer-term outlook than a single debt milestone.
“The ongoing carrying cost, or the interest cost from the government, is the part that really matters,” he said.
Continued strong growth would give the government room to respond and help it maintain interest payments. He made that assessment conditional on growth continuing at an elevated rate.
Turning to portfolios, McCurdy described Schwab's preference for bond duration below a benchmark of about five to six years. Duration measures how sensitive a bond's price is to changes in interest rates.
He also said portfolios concentrated solely on a debt crisis could carry other risks that were less apparent. His discussion separated those longer-term exposures from uncertainty surrounding the borrowing deadline.
McCurdy gave no debt threshold that would trigger a crisis or growth rate needed to sustain interest payments. He also offered no timetable for resolving the longer-term budget problems.
