Jerome Powell says the $39 trillion national debt is “unsustainable,” but warns that the “trajectory” will not end well ‘ | Good luck

Powell said during a wide-ranging discussion before about 400 students: “The debt situation is unsustainable, but the path is not sustainable. It’s not going to end well if we don’t do something soon.”

These words add to the consistent warning that Powell has heard for many years, that although the debt situation can be controlled in the short term, the financial system is not. His comments also come as the country’s average gas price has approached $4 per gallon during the war in Iran that shows no signs of settling soon, despite President Trump’s talk of a possible end to hostilities.

Powell was careful to draw a distinction between the stock of debt and its path, noting that the US, as a global financier and home to the world’s largest stock market, can hold large amounts of debt through small economic means.

These words came in response to a student who asked whether the size of the US debt is destroying “the point of natural payment methods.” Powell acknowledged that no one knew exactly where that place was – pointing to Japan as a country with a much higher debt-to-GDP ratio than the US – but said the travel direction was unclear.

“What is clear is that our debt is growing faster; the federal debt is growing faster than our economy,” Powell said. And that ratio is rising.

Interest payments on the national debt are now estimated to exceed $1 trillion in the 2026 fiscal year — nearly three times the $345 billion the government paid in 2020. In the first three months of the current fiscal year alone, interest payments have reached $270 billion, which is more than Social Security’s spending over the same period. These are the real obstacles to real money options. But they are obstacles, not collapses—and conflating the two distorts the policy conversation. The national debt is expected to rise from 101% of GDP today to 120% of GDP in 2036, surpassing the post-World War II record, according to estimates by the Congressional Budget Office.

It’s about balance

However, Powell did not want to pay the debt directly. He suggested that the reform should be moderate – and more achievable, if there is political will. “We don’t have to pay off the debt,” he said. “We just need to have basic stability and start making the economy grow faster than the debt.”

The chairman of the Fed was careful to note that monetary policy is not his power. “This is certainly not the Fed’s job,” he said, and admitted with dry humor that his warnings often fall on deaf ears in Washington. “I’m basing it on high-level data, which basically everyone else is ignoring.”

To be fair, Powell is not wrong that America’s debt is not sustainable on paper. But that has been the verdict for decades—and the sky has stubbornly refused to fall. Also, his chosen solution to achieve the main balance, so the economy grows faster than the debt, will be difficult, to say the least. In fact, closing the primary deficit of the size of the American government means raising revenues significantly; reducing spending in politically charged areas such as Medicare and Social Security; or banking on growth rates that history shows are optimistic. But as Powell noted, the Fed chair is not responsible for solving the problem.

The broad nature of Powell’s remarks highlighted the central bank’s problems. Powell has spent his time defending the political independence of the Fed vigorously, insisting throughout the conversation that the Fed must “stick to our knitting” and resist pressure to use its resources for purposes beyond a large number of jobs and price stability. The financial crisis that forced the Fed’s hand would represent exactly the kind of action he warned against.

Powell made those limits clear when he explained his Fed governance philosophy. He said: “There’s always a time when the system seems to say, ‘It might be better to use that tool for something else.'” It happens all the time. And we just have to be in a position where we’re not trying to work against any politician or any administration, but we have to be careful to stick to what we’re doing.”

There is also something surprising in Powell’s warning about debt sustainability as he heads an agency whose policies have made borrowing cheap for years. As JPMorgan warned in its 2026 outlook, there may be an “indirect path to reducing the US government’s debt burden” – partly due to the link between the Fed’s policy and the Treasury’s funding needs. Bridgewater’s Ray Dalio described one possible outcome as a “heart attack” on the economy, with government investment falling short of debt service obligations. It’s a serious concern, but it’s an argument for smart financial reform, not for taking Powell’s Harvard speech as a five-alarm fire.

Former Fed Chair Janet Yellen made a similar statement in January, warning that ballooning debt could limit the Fed’s ability to deal with unemployment and inflation, while noting that lawmakers were not “accepting the risks sufficiently.” The sound of honest words is true. So is the danger of that chorus being a cover for the wounds that hurt Americans too much to admit – Powell’s words, though sincere, did not say anything.

Credit deserves serious attention. But critical care means a real account of the tradeoffs, not just pure soundbites from Cambridge telling lawmakers to act “soon,” with no guidance on how aggressively acting could be as destabilizing as the debt itself.

Powell’s term as the chair of the Fed ends in May 2026. His financial warning, which was given not on the stage of Washington but in the room of Harvard students, may be one of the clearest statements of his time: The debt situation can survive, but only if the conditions change. “It’s not going to end well, if we don’t do something right,” he said.

For this story, Good luck Journalists have used artificial intelligence as an investigative tool. The editor has verified the accuracy of the content before publishing.