{"id":1448365,"date":"2026-10-22T17:13:44","date_gmt":"2026-10-22T15:13:44","guid":{"rendered":"https:\/\/www.payoff.ch\/?p=1448365"},"modified":"2026-10-22T17:14:05","modified_gmt":"2026-10-22T15:14:05","slug":"the-elections-come-and-go-but-the-debt-remains","status":"publish","type":"post","link":"https:\/\/www.payoff.ch\/en\/news\/the-elections-come-and-go-but-the-debt-remains","title":{"rendered":"The elections come and go, but the debt remains"},"content":{"rendered":"\n

Poll aggregators, such as\u00a0RealClearPolling<\/em>, currently give the Democrats a significant lead in the race for the House, which is currently controlled by the Republicans. Prediction markets, for their part, give the Democrats a slight edge in regaining control of the Senate. However, nothing is certain: a divided Congress, with a Democratic House and a Republican Senate, remains a credible scenario. Conversely, the Republicans retaining control of both chambers now seems unlikely.<\/p>\n\n\n\n

The direction of public spending will depend in particular on the outcome of these elections. The Democrats are expected to seek to direct more spending towards healthcare, public infrastructure and the energy transition. The Republicans, who have been under greater pressure over the cost of living since Donald Trump\u2019s return to the White House, are expected to place greater emphasis on tax cuts, deregulation and boosting the defence budget.<\/p>\n\n\n\n

But behind these divergent approaches lies a consensus that is rarely questioned: the massive reliance on public debt. As the former Republican Speaker of the House, Paul Ryan \u2013 a traditional advocate of fiscal discipline \u2013 observed, \u2018both parties have become populist parties\u2019.<\/p>\n\n\n\n

Yet this reliance on debt will soon have to face two major challenges.<\/p>\n\n\n\n

The first is the debt ceiling, that is, the maximum amount of debt authorised by Congress. This is currently set at $41,100 billion, whilst federal debt has already exceeded $40,000 billion. Under the broader definition used by the IMF, the gross debt of the general government sector stands at 126 per cent of GDP. Against a backdrop of a federal deficit of nearly 6 per cent of GDP, the Bipartisan Policy Centre <\/em>estimates that the ceiling could be reached between late winter and mid-summer 2027. This would not immediately trigger a default: the Treasury would then have several months to implement extraordinary measures before the truly critical deadline. However, unless the outgoing lawmakers resolve the issue before the new Congress takes office on 3 January 2027, this deadline promises a new and particularly tense political showdown over the coming year. Even if an agreement is expected to be reached before the final deadline, it could be preceded by significant political tensions, leading to increased volatility in the financial markets, which are concerned about the budgetary uncertainty emanating from Washington.<\/p>\n\n\n\n

But once the debt ceiling has been raised, a second challenge awaits the US debt, regardless of the election result: at what cost will the Treasury be able to continue to finance itself? <\/p>\n\n\n\n

Currently, according to the\u00a0Congressional Budget Office\u00a0<\/em>(CBO), net interest payments already account for 3.3 per cent of GDP, more than the defence budget. However, part of this debt was raised at very low rates, typical of the period prior to 2022. This cost is therefore set to rise, due not only to the increase in the level of debt but also to rising interest rates.\u00a0Back in February 2026, the CBO was already forecasting that the net interest burden would reach 4.6 per cent by 2036.\u00a0However, interest rates have risen since then, which is likely to gradually increase the cost. Added to this is the fact that the need for public refinancing is competing with the increased raising of capital by players in the AI ecosystem, who must finance their colossal investments. The consequence, as highlighted by Larry Fink, the CEO of BlackRock, is that the race for capital has rarely been so fierce in the United States1<\/sup>.<\/p>\n\n\n\n

In this tense environment, it is essential that investment in artificial intelligence yields significant productivity gains. Otherwise, competition for savings would result in a higher cost of capital. The fate of US debt is therefore partly linked to that of AI.<\/p>\n\n\n\n

Admittedly, for the time being, AI companies \u2013 with the exception of the most vulnerable ones \u2013 are still able to raise capital with ease, as is the US government. Voters can therefore put the issue of debt to one side for the time being. But it will inevitably resurface. The nation\u2019s next real political milestone may therefore well not be on the evening of 3 November 2026, but rather sometime in 2027, when the newly elected representatives will have to convince American and international investors to continue financing the country at a manageable cost in a world where competition for capital \u2013 and not just for voters \u2013 is fierce.<\/p>\n\n\n\n

__<\/p>\n\n\n\n

Disclaimers: These data and opinions, as well as the sectors mentioned, are provided for information purposes only and, as such, do not constitute an offer to buy or sell any security, nor do they constitute investment advice or financial analysis. The opinions are those of the author; LFDE shall not be held liable for them under any circumstances. Past performance is not indicative of future results.<\/p>\n\n\n\n

__<\/p>\n\n\n\n

1<\/sup>\u2018America Needs More Capital<\/em>\u2019, The Wall Street Journal, 14 October 2026<\/p>\n","protected":false},"excerpt":{"rendered":"

On 3 November, Americans will go to the polls for the mid-term elections.\u00a0They will elect a new House of Representatives in its entirety, as well as a third of the Senate.<\/p>\n","protected":false},"author":5,"featured_media":1437614,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ngg_post_thumbnail":0,"footnotes":""},"categories":[220],"tags":[],"class_list":["post-1448365","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-opinion-leaders-en"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/posts\/1448365","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/comments?post=1448365"}],"version-history":[{"count":1,"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/posts\/1448365\/revisions"}],"predecessor-version":[{"id":1448366,"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/posts\/1448365\/revisions\/1448366"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/media\/1437614"}],"wp:attachment":[{"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/media?parent=1448365"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/categories?post=1448365"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/tags?post=1448365"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}