Summary of Key Points
The U.S. national debt has surpassed $39 trillion, with annual interest payments on the verge of exceeding $1 trillion—more than the defense budget—creating a vicious cycle of debt accumulation. High debt drives up interest rates, which in turn requires borrowing more money to service the debt, further expanding the debt burden. To reduce the interest burden, the Federal Reserve may adjust its inflation measurement methods (such as excluding price shocks like housing and oil prices that affect consumers) in order to indirectly lower interest rates. Although it uses the pretext of “AI improving productivity,” the real goal is to avoid the political challenges of raising taxes or cutting spending. In the end, ordinary Americans will bear the cost through increased living expenses or a hidden devaluation of the currency.
1. The Vicious Cycle of Debt Interest: America’s Fatal Fiscal Trap
The U.S. currently owes $39 trillion, of which $31.3 trillion is held by the public, nearly equal to the country’s annual GDP. What’s more alarming is not the amount of debt but the interest costs: In 2025, interest payments amounted to $970 billion, exceeding the defense budget; by 2026, they will exceed $1 trillion, and by 2036, they will reach $2.1 trillion.
How did this cycle begin? For example, if you owe a bank $1 million with annual interest of $50,000, and your earnings are not enough to cover the interest, you have to borrow another $50,000, leaving you owing $1.05 million the following year with interest of $52,500—a growing debt burden. This is precisely what’s happening in the U.S.: Interest payments require new loans, leading to an ever-increasing debt and rising interest rates, creating a dead end. The U.S. Government Accountability Office has explicitly described this as “unsustainable fiscal trajectory.”
2. The Hidden Tax on Ordinary Families: Paying $7,300 in Interest Each Year
These interest payments don’t come out of nowhere; they are ultimately distributed to every household. In 2025, each family will pay an average of $7,300 in interest—more than their annual healthcare expenses ($6,500), gasoline costs ($2,500), and education expenses ($1,200). By 2036, this figure is expected to rise to $1,5700.
This means that each family will have to pay an additional “debt tax” every year. Money that could be used for buying furniture or enrolling children in tutoring programs is instead being used by the government to service debt, directly squeezing the quality of life for ordinary Americans.
3. The Tricks in Inflation Measurement: Can Changing Methods Really Reduce Inflation?
To lower interest rates, it’s essential to reduce inflation first, as interest rates are closely linked to inflation levels. Therefore, the U.S. has started manipulating how inflation is calculated:
- The “Trimmed Mean” method: This excludes the most extreme price changes (such as sudden increases in oil prices or housing costs), labeling them as “short-term shocks.” For example, while actual inflation in 2022 was 9%, using this method, it was reported to be only 5.5%. Rising housing prices might also be considered a one-time event and excluded from the calculation.
- Historical Precedents: In the 1980s, the U.S. removed housing costs from inflation calculations on the grounds that real estate is an investment. However, the cost of buying or renting homes for consumers has been steadily increasing, yet official data does not reflect this, leading to a disconnect between perceived and actual inflation.
The purpose of these changes is simple: To make inflation seem lower, allowing the Federal Reserve to justify lowering interest rates and reducing the government’s debt servicing burden. However, the real cost of living for ordinary people continues to rise; it’s just that the statistical figures pretend otherwise.
4. The AI Narrative: A Real Solution or a Shield?
The new Federal Reserve chair, Powell, uses AI as a justification, claiming that AI will boost productivity and prevent inflation even if more money is printed (since it will lead to increased production of goods and services). Indeed, tech companies invested $380 billion in AI in 2025, and this figure is expected to double by 2026, contributing to GDP growth.
The problem is that AI’s impact on productivity is a long-term process (10 years or more), while interest rate adjustments are immediate. For instance, current tariffs are causing inflation, which AI cannot address. Thus, AI seems more like a shield—an excuse for adjusting inflation measurement methods and implementing loose monetary policies.
5. The Fundamental Dilemma: Raise Taxes or Cut Spending, or Let Money Lose Value?
The U.S. fiscal crisis is rooted in the fact that debt is growing at twice the rate of the economy. There are only three ways to break this cycle:
1. Raise taxes or cut spending: For example, reducing social security benefits or increasing taxes, but this is politically difficult (选民 will oppose it).
2. Lower interest rates: This requires lower inflation, which can be achieved by changing inflation measurement methods.
3. Allow inflation to rise: If nominal GDP grows faster than debt, the debt’s value relative to the currency decreases, although the value of money in the hands of consumers also declines.
The U.S. has chosen the latter two approaches: adjusting inflation measurements to lower interest rates and implicitly devaluing the currency. As a result, the purchasing power of savers (such as elderly people with bank accounts) is eroded, while the debt burden on the government is reduced. For ordinary Americans, living costs will rise anyway—either through direct price increases or a hidden devaluation of money, depending on whether official data acknowledges it or not.
Conclusion: The Toll on Ordinary People
No matter how the U.S. manipulates the numbers, the cost will ultimately fall on ordinary citizens. They will either have to bear a larger share of interest payments or see the value of their money decrease over time. The so-called “inflation measurement adjustments” are merely a way of turning visible debt pressures into invisible currency devaluation, effectively shifting wealth from savers to the government.
In short, the U.S. debt will be paid for by ordinary Americans, though the method used may just make it less noticeable to them.