The U.S. Treasury’s latest financial statements show the federal government is insolvent, with liabilities nearly eight times its assets and a widening fiscal gap. The report reveals $47.78 trillion in official liabilities, excluding $88.4 trillion in unfunded Social Security and Medicare obligations. Lawmakers are pushing for constitutional fiscal limits as foreign investors pull back and geopolitical threats target U.S. financial assets.
Treasury declares U.S. insolvent in FY2025 report
The Treasury’s consolidated financial statements for FY2025 reveal $6.06 trillion in assets against $47.78 trillion in liabilities, excluding $88.4 trillion in unfunded Social Security and Medicare obligations. The government’s net position worsened by $2.07 trillion from FY2024, driven by a $2 trillion jump in federal debt and higher benefit obligations. Combined on- and off-balance-sheet commitments now exceed $136.2 trillion, roughly five times U.S. GDP, prompting the GAO to issue its 29th consecutive disclaimer of opinion due to persistent accounting weaknesses. Fortune
Political leaders push for constitutional fiscal limits
House Budget Chair Jodey Arrington and bipartisan allies are urging structural reforms, including the Fiscal Commission Act and an Article V Convention to mandate fiscal responsibility. Arrington notes it took 200 years for U.S. debt to reach $1 trillion, but now interest costs alone exceed that annually, surpassing the defense budget. Proposals range from capping deficits at 3% of GDP to enshrining balanced budget rules in the Constitution, reflecting deep concern over Congress’s inability to act.
Foreign investors pull back from U.S. markets
Treasury data for January shows a net $25 billion outflow from U.S. financial markets, with private investors pulling $76.1 billion while foreign official institutions added $51.1 billion. Despite these outflows, foreign residents still bought $63.5 billion in long-term U.S. securities, including $42 billion from private investors. The mixed flows, including reduced holdings of Treasury bills and lower U.S. bank liabilities to foreigners, may indicate shifting global demand for U.S. assets.
Iran threatens financial institutions holding U.S. debt
Iranian parliament speaker Mohammad-Bagher Ghalibaf warned that entities financing the U.S. military, including holders of U.S. Treasury bonds, are ‘legitimate targets.’ The unprecedented rhetoric extends Iran’s threats from military and energy infrastructure to the global financial system, potentially alarming central banks, sovereign funds, and major financial institutions. The warning comes amid heightened conflict in the Gulf and U.S. ultimatums over the Strait of Hormuz, adding geopolitical risk to already volatile markets.