The United States is growing, but sustaining that growth is becoming increasingly difficult

The United States continues to grow. But doing so is becoming increasingly costly. This is one of the primary contradictions facing the world’s largest economy today: economic activity remains robust, businesses continue to invest, and artificial intelligence is ushering in a new technological cycle—yet financing all this growth is becoming progressively more expensive.

The problem can be summarized by four figures: $40 trillion in public debt, an annual deficit of nearly $2 trillion, $1.36 trillion allocated to interest payments, and Treasury bond yields that remain high.

This is not an immediate crisis. The United States retains an enormous capacity to finance itself in dollars and remains the world’s leading financial market. But the equation is shifting.

For years, a growing economy could partially offset the burden of high debt. Now, growth must coexist with significantly higher financing costs—and this affects everyone.

It affects Washington, which must pay more to refinance its debt; businesses, as the cost of capital rises; consumers, because credit has become more expensive; and investors, as government bonds now offer yields high enough to compete with riskier assets.

Growth is not enough to resolve the debt

The U.S. economy maintains a positive pace of expansion. Real Gross Domestic Product grew at an annualized rate of 2.2% during the second quarter of 2026, according to the third estimate from the Bureau of Economic Analysis. In the first quarter, growth stood at 2.5%. Consumption, investment, and exports were among the primary drivers of this expansion.

This is a reasonably solid result. However, there is a significant distinction between an economy growing and that growth being sufficient to resolve fiscal imbalances.

The federal government closed the 2026 fiscal year with a deficit of nearly $2 trillion—12% higher than the previous year. It was the third-largest deficit ever recorded in U.S. history. Meanwhile, the federal debt surpassed $40 trillion in August.

What concerns analysts most is not just the size of the debt, but the cost of servicing it. Interest payments made by the government reached approximately $1.36 trillion during the 2026 fiscal year—an all-time high.

This means that an increasingly large share of public resources must be directed toward paying down accumulated debt, rather than funding new investments, infrastructure, social programs, or tax cuts. And this is where a cycle emerges that worries the markets.

If the government maintains a large deficit, it needs to issue more debt. If investors demand higher yields to purchase those bonds, the cost of financing rises. And if interest costs climb, the deficit may grow even further. Economic growth helps, but on its own, it does not break this cycle.

The behavior of the bond market itself is sending a signal. On October 19, the yield on the 10-year U.S. Treasury note stood at around 5.09%, while the 30-year bond yielded approximately 5.43%, according to Federal Reserve data.

To understand the significance of these figures, one need only look at the real estate sector. The 30-year mortgage rate recently reached 7.40%, according to data cited by Reuters—a far cry from the rates near 3% that were common for much of the last decade.

But the impact extends beyond housing. A company looking to finance a factory, purchase machinery, or expand its production capacity must also contend with a higher cost of capital.

For a large corporation with access to international markets, this challenge may be manageable. For a mid-sized firm, however, it could mean postponing an investment, reducing debt, or accepting a project with lower profitability.

This is why the debate over U.S. debt is no longer just a Washington issue; it has become a business issue.

Artificial intelligence accelerates the demand for capital.

The second major paradox lies in artificial intelligence. Major technology companies are investing extraordinary sums in data centers, semiconductors, digital infrastructure, electricity, and equipment. While this process could boost productivity and spark a new cycle of growth, it also requires capital.

An economy that demands vast amounts of financing while interest rates remain high faces clear strain. For this reason, the Federal Reserve Bank of San Francisco has been closely monitoring this phenomenon. Their analysis shows that investment in equipment related to information processing is growing at an extraordinarily high rate, driven in large part by the expansion of artificial intelligence.

This phenomenon also has a less obvious consequence: certain technological components, which historically tended to decrease in price, have begun to show significant price increases. Artificial intelligence may, therefore, generate productivity gains in the future while simultaneously exerting upward pressure on prices in the present.

This scenario complicates the Federal Reserve’s task. The central bank needs to prevent inflation from remaining above its 2% target for too long, yet it also wants to avoid cooling down an economy that continues to grow.

The traditional tool for combating inflation is interest rates. However, raising them comes at a cost: it affects consumers who rely on credit, puts pressure on small and medium-sized enterprises, reduces the appeal of new investments, and increases the cost of federal government financing.

The situation is particularly delicate because inflation is not yet fully under control. At the same time, the labor market and consumer spending have shown greater resilience than anticipated.

Artificial intelligence introduces a new variable: some of the companies leading the charge in technological investment possess enough liquidity to keep spending, even when interest rates are high. Small businesses do not necessarily enjoy that same advantage.

The result could be an economy increasingly split between companies with abundant access to capital and those that depend on bank credit to grow. For executives, this distinction is becoming increasingly significant.

High interest rates do more than just change the cost of a loan; they also alter the evaluation of any investment project. The more expensive capital becomes, the higher the expected return must be to justify building a new factory, making an acquisition, expanding internationally, or hiring new staff.

This mechanism could end up moderating growth without necessarily triggering a recession—which is precisely the outcome the United States is trying to avoid.

For now, there are no signs that the economy is on the verge of a contraction. The landscape is different: growth continues, but sustaining it requires ever-greater financial resources.

Wall Street is already taking note of this shift. High yields on Treasury bonds offer an attractive alternative to stocks and other risky assets. At the same time, the government’s growing financing needs are forcing the market to absorb a massive amount of debt.

Economists and business leaders share the same assessment

According to The Wall Street Journal, a survey conducted in October among 71 academic, financial, and business economists revealed that many expect U.S. bond yields to remain high. More than a third of those surveyed believe it is possible that the 10-year Treasury note will hover around or above 5% through 2027.

This data helps explain the shift in the landscape. In the decade following the 2008 financial crisis, businesses and governments grew accustomed to a world of relatively cheap money. But that world no longer exists. Capital now carries a higher price tag—and the United States, despite its immense economic and financial strength, is not entirely insulated from this reality.

The question for the coming years will not merely be how much the U.S. economy will grow, but rather what it will cost to finance that growth. If productivity rises robustly, artificial intelligence yields new gains, and the economy maintains a healthy pace, the United States will have the capacity to absorb much of that pressure.

However, if the deficit continues to expand, interest costs keep rising, and long-term rates remain elevated, the financial burden could increasingly act as a drag on growth.

For now, the story is not one of a U.S. economy in crisis. It is something more compelling: the story of an economy that continues to grow, while discovering that growth itself comes at a price.