Global Economy Increasingly Dependent on Government Debt and Fiscal Expansion
The world’s largest economies are becoming increasingly dependent on government borrowing to sustain economic growth, a shift that is reshaping global fiscal policy and raising concerns about long-term debt sustainability. From the United States and Europe to Japan and China, governments are expanding spending and running larger deficits as growth slows and political pressure mounts to support households and industries.
According to The Wall Street Journal, public debt across advanced economies is now approaching levels last seen during major crises, even as borrowing costs remain structurally higher than in the past decade. Governments are relying on fiscal stimulus to offset weaker private-sector momentum, but the strategy is exposing vulnerabilities in sovereign bond markets as investors scrutinize long-term repayment capacity.
Recent developments in Japan underscored these risks, after plans for expanded government spending contributed to a sharp rise in bond yields. Similar pressures are emerging elsewhere, as higher interest expenses consume a growing share of public budgets, limiting flexibility for future policy responses.
Economists cited by the Journal warn that while deficit-funded spending may support near-term growth, it leaves governments more exposed to market volatility and policy shocks. Over time, countries may face difficult trade-offs involving higher taxes, reduced spending, or structural reforms to stabilize debt levels without undermining economic confidence.
The trend marks a notable departure from the post-financial-crisis period, when ultra-low interest rates masked the cost of rising debt. With global capital markets now more sensitive to fiscal discipline, government balance sheets are once again becoming a central factor in financial stability and policy credibility worldwide.
