{"id":867161,"date":"2026-10-01T14:50:11","date_gmt":"2026-10-01T14:50:11","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/867161\/"},"modified":"2026-10-01T14:50:11","modified_gmt":"2026-10-01T14:50:11","slug":"heres-what-the-debt-default-clock-tells-us-and-doesnt-tell-us-about-americas-risk-of-default-vcu-news","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/867161\/","title":{"rendered":"Here\u2019s what the Debt Default Clock tells us (and doesn\u2019t tell us) about America\u2019s risk of default – VCU News"},"content":{"rendered":"


\n By Leila Ugincius<\/a> \n<\/p>\n

The national debt \u2014 more than $40 trillion and rising \u2014 is growing at a rate of $23,494<\/a> per second. That\u2019s nearly $2,000<\/a> more than a family of two living at the poverty line earns in a year.<\/p>\n

Going forward, 67 cents of every $1 the nation borrows will go to pay interest on that debt. And if the government misses just one scheduled payment, the national Debt Default Clock<\/a> will reach midnight, triggering a fiscal crisis. In July, the clock inched closer and now stands at two minutes till midnight, closer than it\u2019s ever been.\u00a0\u00a0<\/p>\n

Virginia Commonwealth University economics professor Oleg Korenok, Ph.D., chatted with VCU News about what this means.<\/p>\n

What is debt default?<\/p>\n

A debt default happens when a borrower fails to make a promised payment on time. For our government, that would mean missing an interest payment or failing to repay debt when it comes due.<\/p>\n

The United States is not like a family or business. Our country borrows in dollars, and the government can create dollars. So it cannot simply run out of money in the usual sense.<\/p>\n

Too much borrowing can still cause serious problems. It can lead to inflation, higher interest rates and less room to respond to the next recession or emergency. The government could also miss a payment because of a political decision, especially if Congress refuses to raise the debt ceiling.<\/p>\n

What is the Debt Default Clock?<\/p>\n

The Debt Default Clock is not an official government measure. It was created by a private group called the Compact for America Educational Foundation<\/a>, which supports tighter limits on government borrowing.<\/p>\n

The group has chosen 12 tests involving debt, spending, taxes, economic growth and other issues. When the government fails one of those tests, the clock moves closer to midnight.<\/p>\n

But the \u201cminutes\u201d are not real time. Two minutes before midnight does not mean that default will happen in two months, two years or any other set period. It simply means that, under the group\u2019s own rules, failing two more tests would move the clock to midnight.<\/p>\n

I see the clock mainly as a way to attract public attention. It points to a real problem, but it is not a reliable forecast of default.<\/p>\n

What happens if the Debt Default Clock reaches midnight?<\/p>\n

Nothing happens automatically. Midnight would mean that the group believes the government has failed enough of its tests to be in a serious financial crisis. It would not mean that the government had actually missed a payment.<\/p>\n

That is the biggest weakness of the clock. It makes a complicated issue look like a precise countdown. But there is no widely accepted economic model showing that failing 10 of these 12 tests means default is close.<\/p>\n

A better warning sign would come from financial markets. If investors became seriously worried about lending to our government, they would demand much higher interest rates. We should look especially at interest rates after inflation and compare them with both past rates and the economy\u2019s growth rate.<\/p>\n

How did we get to two minutes before midnight?<\/p>\n

For many years, the government has spent more than it collects in taxes, and it has borrowed the difference.<\/p>\n

Borrowing is not always bad. It can make sense during a recession, war or major emergency. It can also make sense when the money pays for projects that will create large benefits in the future.<\/p>\n

The problem is that our government keeps borrowing large amounts even when there is no major emergency and when the benefits of some spending are unclear. More debt also means larger interest payments, especially now that interest rates are no longer unusually low.<\/p>\n

That is a real concern. But it does not mean our country is literally two minutes away from default.<\/p>\n

Can we turn back time and add minutes to the Debt Default Clock?<\/p>\n

Under the group\u2019s rules, yes. If the government began passing more of its 12 tests, the clock could move backward.<\/p>\n

More broadly, the government could reduce the risks from heavy borrowing by spending more carefully, collecting enough taxes to pay for its promises and borrowing mainly when there is a strong reason to do so. Faster economic growth would also make the debt easier to carry.<\/p>\n

The main issue is not that our country is about to run out of dollars. The real concern is that continued borrowing could lead to inflation, higher interest costs and less freedom to respond when the next crisis arrives.<\/p>\n

The clock deserves some credit for drawing attention to a real problem. But it does so by presenting a made-up countdown as if it were a scientific measure. It is a powerful image but not a very good economic tool.<\/p>\n

Subscribe to VCU News<\/p>\n

Subscribe to VCU News at newsletter.vcu.edu<\/a> and receive a selection of stories, videos, photos, news clips and event listings in your inbox.<\/p>\n","protected":false},"excerpt":{"rendered":" By Leila Ugincius The national debt \u2014 more than $40 trillion and rising \u2014 is growing at…\n","protected":false},"author":2,"featured_media":867162,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[18],"tags":[23,3,21,19,22,20,25,24],"class_list":["post-867161","post","type-post","status-publish","format-standard","has-post-thumbnail","category-united-states","tag-america","tag-news","tag-united-states","tag-united-states-of-america","tag-unitedstates","tag-unitedstatesofamerica","tag-us","tag-usa"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/867161","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=867161"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/867161\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/867162"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=867161"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=867161"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=867161"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}