Stabilizing $40 Trillion Debt Would Add $36,000 to Household Income

A stable national debt would put nearly $36,000 more in annual household income over the next three decades, according to a new report from the Committee for a Responsible Federal Budget (CRFB).

The finding turns Washington's affordability debate on its head. While candidates trade proposals on prices and the cost of living, the CRFB argues that deficit reduction—not targeted consumer relief—is the most powerful tool available to Congress.

The stakes are political as much as economic. A July Pew Research study showed the economy was the top issue for voters heading into the 2026 midterms, with 29% saying they wanted Congressional candidates to address price increases. Another 15% named affordability and the cost of living specifically. President Donald Trump faces added pressure as the U.S.-Iran conflict disrupts global oil supply chains.

The CRFB's argument rests on the mechanics of monetary policy. Inflation currently runs at 3.4%, well above the Federal Reserve's 2% target. Fiscal discipline, the committee writes, would help the Fed bring it down.

"When interest rates remain well above the zero lower bound and the economy is performing near its productive capacity, deficit reduction can reduce excess demand and slow price growth," the report states.

The committee also argues deficit reduction would expand supply by easing the "crowding out" of private investment—a concern sources previously raised with Fortune regarding Treasury Secretary Scott Bessent's latest bond plan.

"Deficit reduction can further reduce inflation by lowering self-reinforcing inflation expectations to the extent it reduces the likelihood that future policymakers will aim to inflate away the national debt," the CRFB adds.

The household math is concrete. A 1.5 percentage point drop in interest rates would save a family $5,800 per year on a $500,000 mortgage and $500 per year on a $50,000 car loan, the committee calculates.

The income effect

Debt hawks focus less on the headline $40 trillion figure than on the debt-to-GDP ratio, now roughly 123% in the United States. The Congressional Budget Office (CBO) estimates that stabilizing that ratio would lift real per-person income growth by 10% over the next three decades—and by more than 44% compared with a high-debt scenario.

Using the CBO's modeling, the CRFB frames the stakes in dollars: "To put these numbers in context, income per person would grow by $46,500 over the next three decades—in today's dollars—with a stable debt, as opposed to $32,350 with rapidly rising debt. On average, people will thus enjoy $14,250 more annual income from stable debt—nearly $36,000 per household—as compared to rapidly rising debt."

Not everyone shares the alarm. Optimists note the U.S. ratio looks healthier than other developed economies: Japan's stands at around 207%, per the International Monetary Fund, without a bond market meltdown.

Policymakers, including the president, argue the U.S. can grow its way out of the imbalance. "There's nothing magic about the $40 trillion number," Bessent said on CNBC last month. "And we can grow our way out of that."

The Treasury is currently spending $3 billion a day on interest for the national debt. That growth Bessent is counting on will be welcomed as soon as possible.