Harvard University economics professor Kenneth Rogoff has cautioned that the United States' deteriorating fiscal condition might persist until a severe crisis galvanizes voters into demanding policy changes. During an interview on Friday, he noted that the nation's debt has accumulated unchecked for years, driven by an "almost religious" conviction among academic economists that interest rates would remain low indefinitely.

However, Rogoff pointed out that even as rates rebounded from historic lows and continued their upward trajectory, political leaders have failed to adapt their strategies. "Rates have reversed, but Washington hasn't," the former chief economist at the International Monetary Fund (IMF) stated during the economic policy symposium held in Jackson Hole.

His remarks come as US public debt has surged past the $40 trillion mark, a threshold that has begun to alarm even those who typically advocate for tolerance of fiscal deficits. Concurrently, rising interest rates have inflated government interest payments, potentially creating a "doom loop" scenario where deteriorating debt levels prompt investors to demand higher yields, thereby escalating borrowing costs further.

Additionally, bipartisan consensus in Washington suggests that voters would reject any proposals involving tax increases or substantial spending cuts to narrow the fiscal gap. Rogoff indicated that the long-term Treasury market reflects a reality where the Federal Reserve and the US government would have extremely limited room to maneuver should a crisis erupt.

Looking ahead, Rogoff identified potential shocks over the next five years—including cyber warfare and disruptions stemming from artificial intelligence—that could drive interest rates sharply higher, compounding the nation's fiscal challenges.