“A deficit is neither good nor bad. It's just debt..”
Federal debt held by the public has passed 100% of GDP, and net interest payments crossed $1 trillion in 2025. The Committee for a Responsible Federal Budget put it this way: the U.S. "has never entered an economic downturn or other emergency as indebted as it is today, with deficits as large as they are today, or with as little fiscal space as we have today." Politicians, economists, WSJ editorial writers treat federal borrowing as an economic drag at best, and a risk to the government’s solvency at worst.
A deficit, Linneman argues, isn't good or bad on its own: It's just debt, and debt can be productive or unproductive. A government running a surplus that then gets funneled into overpriced contracts and kickbacks hasn't accomplished anything productive (or virtuous). A government running a deficit to fund investments that drive growth hasn't done anything wrong.
Conversations about the deficit should anchor to two separate questions. The first is whether the country has the capacity to carry its accumulated debt: "can we." The second is whether the specific spending is worth it: "should we." The first is Linneman's focus and the answer is yes.
Total federal debt is roughly $27 trillion, net of amounts the government owes itself. The deficit adds roughly $2.3 trillion annually to our debt per year. Sounds like a lot.Household wealth runs around $180 trillion and grows about 7% per year, or $12 trillion. In other words, a lot more. Against that base and that growth rate, Linneman argues the debt load isn't even close to a dangerous leverage ratio.
This also explains why the bond market hasn't done what deficit-hawks have predicted. As Linneman says,
"I'm 75 years old. If you went back and looked at the pundits my entire life, every year they say, ‘We can't run these deficits. Can't run these deficits. Can't run these deficits. The bond market will revolt. The bond market will revolt. Guess what? The bond market hasn't revolted."
Academic studies looking for a relationship between the size of outstanding federal debt and long-term interest rates find close to nothing. Linneman cited research suggesting a 20% increase in federal debt moves long-term rates by roughly six basis points. His read: The market isn’t ignoring the debt. The debt is over-collateralized, so it isn’t much of a risk.
Being a wealthy country is one reason our debt and deficit spending is affordable. The other reason: we grow fast. "If you're poor or relatively poor and you're not growing, you cannot afford these deficits," Linneman says. The capacity argument rests on being both wealthy and expanding, and it would look different if growth stalled, though the effect wouldn't show up immediately.
None of this speaks to the "should we" question. If you could decide to cut the deficit in half or to double it, what would you do? For Linneman the test is the same either way: what would the spending change mean? A tax increase or dramatic reduction in services to cut the deficit could choke off growth and do more damage than the deficit itself. A doubling of the deficit, should those funds be used productively, could be massively valuable. That “should we” question creates a real debate. It’s separate from whether the country can service what it owes.
For real estate investors pricing deals off current and projected interest rates, the takeaway is that federal debt-service capacity isn't a meaningful driver of bond yields. Maybe that’s one less thing to worry about.
From The Margins
A little of what’s out there.
Say "cot" and "caught." If they sound identical, a map on the internet can probably tell you where you grew up.
Rick Aschmann is a linguist who spent decades collecting the way North Americans actually talk. The result is a single, staggeringly dense map of English dialects, with around 900 audio clips you click through to hear a Boston vowel bend one way and a Pittsburgh one bend another.
The part that gets us: there's no mapping software behind it. He built the whole thing by hand in Paint.net, layer by layer, on his personal website. One person, a paint program, and a very long attention span produced something no institution has bothered to match.
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