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The United States is hurtling toward a fiscal cliff, and tensions between monetary policy and political pressure are boiling over. With the national debt now exceeding $37 trillion, former President Donald Trump has launched a series of fiery attacks on the Federal Reserve, accusing Chair Jerome Powell of compounding America’s financial crisis by refusing to cut interest rates.

In Trump’s view, Powell is not just being stubborn—he’s being destructive. The former president claims that the central bank’s current rate policy is costing the government hundreds of billions of dollars in unnecessary interest payments. With deficits mounting and debt service costs now outpacing core spending programs like national defense, Trump is sounding the alarm. But is he right?

To answer that, we need to understand the scale of the debt crisis, the role of interest rates, the Fed’s current policy stance, and what Trump’s proposals would mean for the economy, inflation, and America’s long-term financial health.

The Anatomy of a Debt Crisis

Let’s begin with the facts. The U.S. national debt has now surpassed $37 trillion, equivalent to more than 130% of GDP—levels not seen since World War II. But unlike post-war America, today’s federal government is not running surpluses or enjoying an economic boom that would allow it to pay down its obligations. Instead, we are seeing perpetual deficits, year after year, regardless of which party is in power.

In fiscal year 2024, the federal government ran a $1.83 trillion deficit, meaning it spent nearly $2 trillion more than it collected in revenue. That gap was filled by borrowing, which added directly to the national debt. Now, just halfway through fiscal year 2025, the government is already projected to run a deficit in excess of $2 trillion, driven by higher interest payments, elevated military spending, expanding entitlement costs, and stagnant revenue growth.

As the debt grows, so does the interest burden. And that’s where Trump’s anger comes into focus.

Interest Payments Surpass Defense Spending

For decades, interest payments on the national debt were largely manageable, thanks to decades of ultra-low interest rates. But that era is over. With the Federal Reserve raising rates aggressively since 2022 in response to the post-pandemic inflation surge, the cost of servicing the debt has ballooned.

As of 2025, net interest payments are on track to exceed $1 trillion per year, making it the fastest-growing category of federal spending. In fact, interest payments have now surpassed military and defense expenditures, marking a historical turning point. The U.S. is literally spending more to service past debt than to defend its national security.

This is the scenario that Donald Trump has been warning about—and criticizing—with increasing intensity.

Trump’s War on Powell: What He’s Saying and Why

When the Fed held rates steady on June 18, 2025, Trump reacted swiftly and angrily. Within hours, he called Powell a “real dummy” and “the worst,” blaming him for denying the federal government the chance to save potentially hundreds of billions of dollars in interest costs.

The next morning, Trump escalated his attack:

“Jerome Powell is costing our country hundreds of billions of dollars. He is truly one of the dumbest and most destructive people in government.”

He went on to compare the Fed unfavorably to the European Central Bank, which has already cut rates 10 times. According to Trump, the U.S. should have lowered rates by at least 2.5%, claiming that doing so would ease pressure on the economy, reduce interest costs, and avoid an unnecessary financial strain on the government.

Trump has also posted earlier comments on this issue:

• June 11: After the CPI report showed declining inflation, Trump urged the Fed to cut rates by 1%, arguing it would lower debt servicing costs “significantly.”

• June 6: He wrote that Powell had missed his window to act and was now “costing our country a fortune.”

And in a widely circulated video clip following the June Fed meeting, Trump criticized Powell further:

“We have a man who just refuses to lower the Fed rate… I’ve tried every approach—being nice, being tough. Nothing works. He’s just not smart.”

Is Trump Right? The Economic Case for Lower Rates

Trump’s core argument is that cutting interest rates would provide immediate fiscal relief. With $37 trillion in debt, even a modest 1% cut in interest rates could save the government $300 billion per year. A 2% cut could bring that number up to $600 billion.

To put that into perspective: $600 billion is more than the entire non-defense discretionary budget of the federal government.

Trump argues that if inflation were to rise again after a rate cut, the Fed could simply raise rates again. “Raise them later if you have to,” he said, “but right now, inflation is under control.”

There is a logic to this, especially if inflation continues to decline and growth remains tepid. Lower interest rates could:

• Reduce federal borrowing costs

• Stimulate economic growth

• Ease the burden on consumers and businesses

• Provide breathing room for fiscal policy

But the risks of cutting rates prematurely are also real.

Why the Fed Is Hesitant

The Federal Reserve’s primary mandate is to maintain price stability and full employment—not to make borrowing cheaper for the federal government. Although inflation has declined substantially since its 2022 peak, core inflation remains sticky, and Fed officials are worried that cutting rates too soon could reignite price pressures.

Moreover, Powell and the Fed are aware that a rate cut in the middle of an election cycle—particularly when aggressively lobbied for by a political candidate—could erode the Fed’s credibility and perceived independence.

There’s also the broader concern that the U.S. government’s fiscal position is structurally unsound. Cutting rates to relieve budget pressure may be a short-term fix, but it doesn’t address the deeper issue: chronic overspending and the political inability to reduce deficits.

The Bigger Problem: Deficits That Never End

Interest rates are only part of the problem. The core issue is that the U.S. government continues to spend far more than it earns. Both parties have contributed to this reality. Spending increases for defense, Social Security, Medicare, and stimulus have continued across administrations, while revenue growth has stagnated or fallen due to tax cuts and economic slowdowns.

The result? Even under conservative estimates, the U.S. is expected to add $20 trillion more to its debt by 2035, pushing the total national debt to $57 trillion—and that’s without factoring in new wars, recessions, or tax extensions.

And that leads us to a bigger question: Are current interest payment projections too optimistic?

Why the Real Interest Cost May Be Far Worse

Current projections from the Congressional Budget Office (CBO) and other agencies show rising interest costs—but these estimates often assume a fairly static outlook. They don’t fully account for:

• Future stimulus packages

• Potential recessions

• Military conflicts (e.g., Iran, Taiwan, Ukraine)

• Renewed tax cuts or expansions

• Emergencies like pandemics or climate disasters

Each of these scenarios would require additional borrowing—and push interest payments even higher. The interest burden could exceed $1.5 trillion per year by the early 2030s, consuming as much as 20% of all federal revenue.

And when that happens, the government may be forced to choose between paying interest or funding essential programs.

Trump vs. Biden: A Deficit Showdown

It’s worth noting that while Trump is criticizing Powell for not cutting rates, his own budget proposals would add significantly to the debt. According to preliminary estimates, Trump’s tax plans and spending priorities could push the fiscal year 2026 deficit above $2 trillion—even higher than under President Biden.

In other words, the issue of debt and deficits isn’t partisan. It’s systemic. The only real difference is how each party wants to spend borrowed money.

Trump wants tax cuts and defense. Biden wants social programs and green energy. Neither side appears willing to confront the hard truth: there is no path forward without painful fiscal reform.

Conclusion: The Clock Is Ticking

The United States is in a race against time. With a $37 trillion debt load and rising interest rates, the financial strain on the federal budget is growing unsustainable. Trump’s frustration with Powell may be rooted in fiscal logic, but the Fed’s caution is grounded in the risks of inflation and monetary credibility.

The deeper issue is this: America’s leaders—on both sides—have become accustomed to borrowing without consequence. But that era is ending. The math no longer works. And the decisions made over the next two years may determine whether the U.S. economy enters a new era of stability or spirals toward a sovereign debt crisis.

So, what’s the answer?

Cutting rates might buy time. But only structural reform can fix the foundation. Until then, expect more political finger-pointing, market volatility, and hard choices ahead.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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