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Treasury Department Declares U.S. Government Insolvent
The most significant recent news is
the Treasury Department's FY 2025 consolidated financial statements, released in late March 2026, which show the U.S. government is technically insolvent.
According to economists Steve Hanke and David Walker, the statements reveal:
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Key Financial Figures
As of September 30, 2025:
- Total assets: $6.06 trillion
- Total liabilities: $47.78 trillion
- Net position: Negative $41.72 trillion
The balance sheet deteriorated by nearly
$2.07 trillion between FY 2024 and FY 2025. The largest drivers were a
$2 trillion increase in federal debt and interest payable (now $30.33 trillion) and a
$438.8 billion increase in federal employee and veteran benefits payable (now $15.47 trillion).
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Off-Balance-Sheet Obligations
The situation is more severe when accounting for unfunded obligations. The
75-year unfunded social insurance obligation surged by $10.1 trillion in a single year, rising from $78.3 trillion to
$88.4 trillion in FY 2025. This was driven primarily by a
$6.9 trillion jump in projected Medicare Part B shortfalls and a
$2.5 trillion increase for Social Security.
When combining on-balance-sheet and off-balance-sheet obligations,
total federal obligations exceed $136.2 trillion — roughly five times U.S. annual GDP.
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Government Accountability Office Finding
The
GAO issued a disclaimer of opinion on the FY 2025 financial statements for the 29th consecutive year, unable to determine whether the statements are fairly presented due to serious financial management problems at the Department of Defense and weaknesses in accounting for interagency transactions.
Here's another way to think about it:
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The Leaky Bucket Analogy
Imagine you have a bucket with a hole in the bottom. Water (money) is pouring in from a faucet (tax revenue), but it's leaking out through the hole (spending exceeds revenue). The bucket is slowly emptying.
Tariffs and military spending are like turning the faucet up louder. You're adding more water, which temporarily slows the bucket from emptying as fast. It
looks like you're solving the problem—more water is flowing in! But
the hole is still there, and it's still getting bigger (interest costs and unfunded liabilities keep growing).
Eventually, no amount of extra water from the faucet will matter because the hole has grown so large that water pours out faster than you can pour it in. At that point, you have only two real choices:
1.
Patch the hole (cut spending, reform entitlements)
2.
Accept that the bucket will empty (default on debt, massive inflation, economic crisis)
The longer you wait to patch the hole, the bigger it gets. A small patch early on is manageable. Waiting a decade means you need a massive repair that disrupts everything.
Tariffs and military spending are like frantically turning up the faucet while ignoring the hole. They create the illusion of progress, but they're not addressing the actual problem—and they might even distract you from noticing the hole is getting bigger.
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