The Capitol building in Washington, D.C. The U.S. now spends almost US$1-trillion a year on interest payments – about US$2.6-billion every day.Annabelle Gordon/Reuters
The United States Congress just passed what may be one of the most fiscally reckless laws in its modern history. The One Big Beautiful Bill Act, signed into law last week, will add an estimated US$3.3-trillion to the national debt over the next decade, while raising the debt ceiling by US$5-trillion – the largest increase ever. But the most troubling aspect isn’t the scale of the spending, it’s what the bill reveals, which is a deepening crisis of institutional memory that should concern every investor.
This isn’t just an American problem; it’s a broader warning about what happens when societies forget hard-won lessons on fiscal discipline learned by previous generations. For investors on both sides of the border, understanding that pattern may be key to protecting capital in a more fragile world.
Non-partisan analysts say the bill’s biggest beneficiaries are wealthy individuals, while many lower-income Americans could see their real incomes fall. But the deeper issue isn’t who wins or loses, it’s the erosion of what once anchored fiscal decision-making. The leaders who were responsible for postwar prosperity in the U.S. lived through the Depression and the Second World War. They understood what happens when debt spins out of control and institutions lose public trust. Fiscal discipline wasn’t an economic theory – it was a survival instinct.
The corporate world is also guilty of overlooking the past. For decades, Wells Fargo was a model of conservative banking, guided by leaders who focused on their client and the bank’s core business. But by the 2000s, a new generation was in charge. Aggressive sales targets replaced client focus, culminating in a scandal where employees opened millions of fake accounts to hit quotas. Over 150 years of brand equity collapsed in less than five years.
This generational shift is exactly what historians William Strauss and Neil Howe described in their book The Fourth Turning. Their theory outlines a cycle in which societies pass through four generational phases, ending in a period of crisis – the “Fourth Turning” – when old institutions break down and must be rebuilt. The pattern is remarkably consistent. The generation that fought the Revolutionary War created the U.S. Constitution. Their great-grandchildren endured the Civil War. That generation rebuilt the Union, only for their great-grandchildren to face the Depression and Second World War. The Greatest Generation then established the modern world order. Today, their great-grandchildren are watching those very institutions falter again.
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The new U.S. legislation ignores long-standing fiscal norms. As David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, has said of fiscal policy more broadly, “This is like ignoring rust on a bridge. It won’t matter today, but someday it will. In finance, as in infrastructure, cracks rarely fix themselves.”
The math is sobering. The U.S. now spends almost US$1-trillion a year on interest payments – about US$2.6-billion every day – just to service existing debt. That already exceeds the country’s entire defence budget. By 2034, interest expenses are projected to hit US$1.7-trillion, more than what’s currently spent on social security. At that point, nearly every new dollar spent will be borrowed to pay for past borrowing.
Canadians shouldn’t feel smug. In the late eighties and early nineties, rising debt and soaring interest costs triggered a crisis of investor confidence. The result was a forced reckoning: sharp budget cuts, tax hikes and a major reset. Even stable democracies can lose control when they stop taking risks seriously.
Demographics add another layer of pressure. U.S. population growth has slowed to 0.6 per cent annually – half its historical norm – and birth rates have fallen over 20 per cent in two decades. By 2035, there will be just 1.8 working-age Americans for every retiree. The median age is now nearly 40, compared to 28 in 1970. More than half the population is over 40. That means slower growth, falling labour force participation and mounting pressure on social programs.
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Instead of pragmatic immigration reform, the U.S. has moved toward increasingly restrictive policies. That may resonate politically, but it deepens the economic challenge facing the country. Without sustained population growth, domestic demand stagnates. And with trade wars and tariff battles making export markets harder to access, who’s left to buy all that added production?
Canada had a different approach. Immigration now accounts for nearly all labour force growth and over three-quarters of total population growth. It supports both production and consumption in the economy. According to a Royal Bank of Canada report, immigration added nearly two percentage points to Canada’s real GDP growth in 2022 – without it, growth would’ve been close to zero. That’s not a rounding error. It’s the difference between expansion and stagnation.
History shows free markets don’t thrive in a vacuum; they need strong institutions. World Bank research finds that countries with better governance, stronger legal systems and stable democracies enjoy higher productivity, more investment and greater resilience. When those institutions weaken, markets stop rewarding innovation and start rewarding political access. That’s not just bad governance – it’s bad investing.
For investors, the question becomes: How do you protect yourself when external frameworks start to wobble?
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First, be cautious of liquidity-driven markets. When governments flood the system with spending and central banks suppress interest rates, asset prices can lose touch with fundamentals. This can last quite a while, but it rarely ends well. Investors who focus on businesses with real earnings, sound governance and sustainable models weather downturns better than those chasing momentum.
Second, reduce single-country exposure. Canadian investors are famously prone to home bias concentrated in domestic banks, energy companies and real estate. Add in large U.S. exposure, and many portfolios are essentially tethered to two countries. That can offer growth but also adds risk, especially if either country experiences fiscal or political stress. Global diversification can help cushion against localized shocks. This isn’t about betting against Canada or the U.S.; it’s about not tying your financial future too tightly to any one framework.
The One Big Beautiful Bill Act isn’t just another round of deficit spending – it’s a signal. When governments abandon fiscal guardrails for quick wins, it points to a deeper shift where long-term stewardship is replaced by short-term spectacle.
But if history teaches us anything, it’s that thoughtful investors don’t panic, they prepare. The portfolios that survive systemic change are the ones built for durability, not perfection. And they reflect a simple truth: Prosperity isn’t permanent, it’s something each generation must earn.
The price of financial security is institutional awareness. The question isn’t whether another turning is coming – it’s whether we’ll be ready when it does.
Sam Sivarajan is a keynote speaker, independent wealth management consultant and author of three books on investing and decision-making. His forthcoming book will explore how to thrive in a world of uncertainty.