Inflation & Nominal Economic Growth to the Rescue: The US Government’s Ugly Fiscal Mess

The article examines the U.S. federal government's fiscal situation in Q1 2026, reporting that federal interest payments reached $305 billion for the quarter while tax receipts fell to $939 billion, with the ratio of interest payments to tax receipts worsening to 32.5%, and the Debt-to-GDP ratio edging up to 122.6%. The author argues that rather than implementing fiscal reforms, the Federal Reserve and government are pursuing a strategy of allowing higher nominal economic growth and moderate inflation (3-5% range) to gradually reduce the debt burden, despite inflation accelerating above the Fed's 2% target and core measures reaching their worst levels since mid-2023.