America has never faced an economic downturn with national debt at this level. A think tank urges the creation of an emergency contingency plan.

America Faces Unprecedented Financial Risk Ahead of Potential Crisis

The United States is entering a period of economic uncertainty with a level of national debt that matches the country’s total economic output—a situation not seen since the aftermath of World War II. A leading bipartisan policy institute has issued a stark warning: the nation is heading into its next emergency without adequate preparation, putting everyday Americans at significant risk.

Fiscal Watchdog Raises Concerns Over Readiness

The Committee for a Responsible Federal Budget (CRFB), a respected nonpartisan organization composed of former government officials from both political parties, has published a comprehensive analysis highlighting that policymakers are dangerously unprepared for the next recession or financial upheaval.

According to the CRFB, “The nation is almost certain to face the next crisis with more debt than ever before, which could severely limit our capacity to respond effectively.”

The organization is urging lawmakers to establish a “Break Glass Plan”—a pre-approved emergency strategy that can be activated immediately when a crisis emerges.

The report is direct: “The U.S. has never encountered an economic shock while carrying this much debt. This leaves the country extremely exposed.”

The CRFB also notes that the current fiscal environment—marked by persistent inflation and instability in Treasury markets—will make it exceptionally challenging to craft an effective response to any future downturn.

Nonetheless, the report insists that action is essential.

How Today’s Debt Differs from Past Crises

The CRFB’s findings underscore the gravity of the situation. When the dot-com bubble burst in the early 2000s, federal debt was just 34% of GDP and the government was running a surplus. By the 2008 financial crisis, debt had risen only slightly to 35% of GDP. At the onset of the COVID-19 pandemic, it stood at 79%. Today, the figure is around 100%, with annual deficits near 6% of GDP and interest payments consuming nearly 20% of federal revenue—double the proportion seen in previous crises.

Projections from the Congressional Budget Office suggest the outlook will deteriorate further, with debt expected to reach 120% of GDP by 2036 and interest costs absorbing 26 cents of every federal dollar.

The CRFB outlines a range of potential disaster scenarios, from the bursting of bubbles in real estate, stocks, artificial intelligence, or digital assets, to unpredictable events like natural disasters, wars, or the collapse of major industries. The report, completed before recent U.S. and Israeli strikes on Iran that disrupted oil markets, also warns that policy missteps—especially in a “stagflation” environment—could be particularly damaging, a risk heightened by ongoing conflict in the Middle East.

A Pattern of Inadequate Crisis Responses

The CRFB’s primary worry is not just the nation’s fiscal weakness, but also Washington’s tendency to exacerbate crises through poorly planned responses.

The report cautions, “Lawmakers too often wait until disaster strikes before considering their options, leading to costly and disorganized measures that may solve one issue while creating others.”

For example, the Great Recession increased the national debt by about 35 percentage points of GDP, and the pandemic response added another 20 points. In both cases, borrowing continued even after the immediate threat had passed, resulting in a persistent structural deficit that is now a permanent feature of the federal budget.

The report also warns against the instinct to simply increase spending in response to emergencies.

“As seen in the early 2020s, excessive stimulus can drive up inflation and interest rates, especially when supply is limited,” the CRFB notes. If the next crisis is triggered by high debt—such as a loss of confidence in Treasury markets, a currency crisis, or runaway inflation—additional borrowing could worsen the situation.

While short-term fiscal stimulus is often appropriate during a downturn, the report stresses that in an environment where high debt sparks panic, further borrowing could be counterproductive.

A Four-Step Blueprint for Future Emergencies

To prevent repeating past mistakes, the CRFB recommends that Congress agree on a four-part emergency plan before the next crisis hits:

• Targeted Stimulus: Deliver relief tailored to the specific crisis, avoiding the inclusion of unrelated priorities that often accompany emergency legislation.
• “Super PAYGO” Rule: Require that every dollar of immediate emergency spending is matched by two dollars in medium-term savings, signaling to creditors a commitment to fiscal responsibility even during crises.
• Automatic Deficit Reduction: Implement a mechanism that triggers once the economy recovers, freezing the growth of major spending programs, capping discretionary spending, and gradually introducing higher taxes on top earners and corporations. The CRFB estimates this could reduce deficits to 3% of GDP within four years, saving trillions over the next decade.
• Bipartisan Fiscal Commission: Establish a commission with the authority to replace automatic cuts with more nuanced reforms to taxes, entitlements, and budget processes, focusing on restoring the solvency of Social Security and Medicare and reducing waste and fraud. Its proposals would receive expedited consideration in Congress.

This approach echoes the desires of Social Security advocates like Martha Shedden, who recently told she hopes for a bipartisan commission similar to the one in 1983 that secured Social Security’s future.

Why Immediate Action Is Critical

The CRFB’s alert comes at a time of heightened financial instability. Long-term Treasury yields remain high, inflation is above the Federal Reserve’s target, and Congress is considering major tax and spending changes that could add trillions more to the debt.

Since 1950, the U.S. has experienced 11 recessions—about one every seven years—with the last ending in 2020. By historical standards, another downturn could arrive at any moment. Unlike previous episodes, however, the government now has far less fiscal flexibility to respond.

The report concludes, “The sooner a comprehensive plan is in place, the better. Emergencies are unpredictable, and we must be ready to act swiftly.”