The U.S. Treasury Didn’t Declare the Country ‘Insolvent’

Two economists — Steve Hanke at Johns Hopkins University and David Walker, a former comptroller general of the U.S. — published an opinion piece in Fortune last month advocating bills aimed at reining in the national debt. In support of this, they pointed to the U.S. Treasury’s financial report on fiscal year 2025, noting that the liabilities for the U.S. government far outweighed the assets and characterizing the government as “insolvent.”

The headline on the March 23 piece — “The Treasury just declared the U.S. insolvent. The media missed it” — became a viral claim on social media, suggesting that there’s been a major new development in the government’s financial position.

But there hasn’t been. One reader asked us about a post that suggested President Donald Trump was to blame.

“The U.S. Treasury did not declare the U.S. government insolvent,” said Kent Smetters, faculty director of the Penn Wharton Budget Model, who told us that he agreed with the larger point of the opinion piece — that the government’s fiscal policy is imbalanced and in need of change.

The writers cited the most recent annual report from the Treasury, released in March, that listed the government’s total assets for fiscal year 2025 — including cash on hand, federal land and loans owed — as just over $6 trillion. It listed the total liabilities as almost $48 trillion.

From that, they concluded, “The U.S. government is insolvent. That’s not hyperbole — it’s the conclusion drawn directly from the Treasury Department’s own consolidated financial statements for fiscal year 2025, released last week to near-total media silence.”

The economists likened the federal government to a household with liabilities totaling much more than its assets could cover. “Uncle Sam, by any accounting standard, is insolvent,” they wrote.

But Jessica Riedl, a budget and tax fellow at the Brookings Institution, told us that the economists are using the methodology of a business, rather than a government — which, importantly, has the authority to levy taxes. The Treasury report does, indeed, confirm that the government could not pay off the federal debt and cover its commitments by selling its assets. “If they didn’t have the power to tax, that would be a problem,” Riedl said.

The Treasury report, itself, makes this point, too. “Due to its sovereign power to tax and borrow, and the country’s wide economic base, the government has unique access to financial resources through generating tax revenues and issuing federal debt securities,” it said. “This provides the government with the ability to meet present obligations and those that are anticipated from future operations and are not reflected in net position.”

Smetters said something similar. “The government’s assets are beyond just its holdings of property and buildings and things like that. It’s really the fact that it has access to a tax base that’s still pretty large in present value.”

Steve Ellis, president of the nonpartisan budget watchdog Taxpayers for Common Sense, told us in an email, “I don’t think insolvency is the right term for the federal government. Except for a short time in Andrew Jackson’s presidency the country has always been in debt. Even when there was brief surplus in late 90s, early aughts, there was still debt.”

All three of the experts we spoke to, though, agreed with the larger premise of the opinion piece, which is that the federal budget is unsustainably imbalanced.

The debt held by the public, which excludes money the federal government owes to itself, was $31.4 trillion as of April 3. The nonpartisan Congressional Budget Office estimates that the fiscal year 2026 deficit will be $1.9 trillion, and in 2036, the annual deficit will be $3.1 trillion. 

“The real problem facing the government,” Smetters said, “is that we currently have a fiscal policy path that is itself imbalanced. Specifically, the present value of future spending far exceeds the present value of future tax revenue. To create balance, we would either need to raise all federal income taxes, including payroll taxes, immediately and forever by 30%, or cut all federal spending, including entitlement programs, immediately and forever by 25%, or some combination.”

But the Treasury has not revealed any new insolvency. The government’s liabilities have been larger than its assets in the Treasury’s annual reports going back decades.

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-- By Michael R. Thomas

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