The U.S. government is on a trajectory to a fiscal apocalypse in this century. Since fiscal 2001, the federal government’s annual planned expenditures have consistently exceeded expected revenues, with the shortfall covered by borrowing.
As of fiscal 2025, total U.S. government debt amounted to $37.6 trillion, representing 124% of the GDP of $30.4 trillion. The annual interest paid on this debt in fiscal 2025 was $970 billion, or about 3.2% of GDP.
There is a clear path to restructuring U.S. government financing for escaping the sovereign debt trap: (1) transform the federal debt into permanent capital and significantly reduce the debt servicing burden; (2) link revenues and expenditures to the size of the economy, and mandate zero-deficit federal budgets; and (3) establish a reserve fund to facilitate a smooth transition and ensure long-term financial resiliency.
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President Donald Trump should propose converting all outstanding U.S. government debt at par into Perpetual Participation Certificates that would pay an annual participation amount equal to 1.25% of GDP for the most recent preceding fiscal year. If GDP grows in any subsequent fiscal year, the size of the participation payments for that year would increase, and, correspondingly, if nominal GDP declines, the size of the participation payments would decrease.
By way of illustration, if the fiscal 2025 debt of $37.6 trillion were converted into Perpetual Participation Certificates, the annual servicing cost would have been only $360 billion (equivalent to 1.25% of fiscal 2024 GDP of $28.8 trillion) instead of the actual $970 billion — a saving of $610 billion. If nominal GDP grows at 5.5% per annum, the annual debt servicing cost at the end of 20 years will nearly triple to about $1.1 trillion.
The U.S. government’s annual recurring revenue streams reflect the federal claim on the resources of the American economy. In fiscal 2025, federal revenues of about $5.2 trillion amounted to 17.2% of the GDP of $30.4 trillion. The principal sources of federal revenues were individual income taxes, $2.7 trillion (8.7% of GDP); corporate income taxes, $0.5 trillion (1.5%); payroll taxes, $1.7 trillion (5.8%); and duties on imports and other excise taxes and fees, $0.3 trillion (1.2%).
In this century, federal revenues claimed a hefty 19.8% of GDP in 2000, which was matched only once in the 20th century (1945). Yet, increasing taxes and import duties in a bid to claim 20% of GDP would at best reduce the federal deficit by half to about 3% of GDP.
So, reining in federal expenditures, which amounted to $7 trillion or 23.1% of GDP in fiscal 2025, to escape the sovereign debt trap is not a choice but a necessity.
The U.S. government delivered zero-deficit budgets (in fact, modest surpluses) for four consecutive years between 1998 and 2001. Over this period, federal expenditures as a percentage of GDP ranged from 18.2% to 17.5%.
The transition to fiscal responsibility should be phased in over a two-year period. A financial cushion will be necessary to absorb temporary shocks and ensure fiscal resiliency. Accordingly, a Fiscal Resiliency Fund should be established.
The initial size of the Fiscal Resiliency Fund would be about $3 trillion. The fund would be capitalized over a two-year period by the proceeds of the (1) monetization of U.S. Treasury holdings of gold; (2) sale of excess real estate (office buildings and land) owned by the federal government; and (3) privatization of U.S. government quasi-business entities such as Fannie Mae and Freddie Mac, NASA, Amtrak, and U.S. Postal Service.
The U.S. Treasury has a huge, undervalued asset — 261.5 million troy ounces of gold — with a book value of about $11 billion ($42 per ounce) versus an estimated current market value of $1.2 trillion ($4,500 per ounce). The most efficient way to unlock the hidden value of this hoard is for the U.S. Treasury to sell the gold to the Federal Reserve at the current market price in a single transaction.
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The sale of excess real estate and the privatization of U.S. government quasi-business entities should be executed over a two-year period. The objective would be to realize net cash proceeds of about $2 trillion.
The net cash proceeds from these asset sales should be invested in an index fund of listed U.S. equity securities so that the value of the Fiscal Resiliency Fund will grow over the long term. The S&P 500 Index annual total return for the most recent 10-year period ended Dec. 31, 2025, was about 14.8%.
Samir Tata is the founder and president of International Political Risk Analytics, an advisory firm based in Reston, Virginia, and author of the book Reflections on Grand Strategy: The Great Powers in the Twenty-first Century.