U.S. $40 trillion debt seen as less risky than peers despite high ratio

The United States crossed the $40 trillion debt mark, reaching a debt-to-GDP ratio of 125.8%, according to IMF data, which is in line with ratios in France, Canada, China and the United Kingdom. Experts contend that the U.S. can sustain higher debt because its economy is larger, the dollar serves as the dominant reserve currency, and its free-market system encourages innovation and flexible reforms. They also note that the nation’s entitlement programs—particularly Medicare, Medicaid and Social Security—have expanded dramatically, now comprising a majority of mandatory spending and threatening long-term fiscal stability.

Demographic headwinds, such as an aging population and lower birth rates, make organic growth harder than after World War II. While AI-driven productivity gains could help raise GDP, analysts caution that without reforms to entitlement spending, debt will keep outpacing growth.