Historian Niall Ferguson claims that the United States could be headed to the same ruin of every previous advanced civilization if it doesn’t fix its debt problem.
Ferguson, the Milbank Family Senior Fellow at the Hoover Institution at Stanford University, warns that America’s colossal debt spending threatens to sink the empire it has built since the end of World War Two.
America’s soaring debt comes as the Donald Trump’s new Pentagon boss Pete Hegseth has pledged to slash defense spending by as much as eight percent each year.
Writing in the Wall Street Journal Ferguson cites what he calls ‘Ferguson’s Law’, taken from an essay by Adam Ferguson in 1767, that it is perilous for a great power to spend more on its debt than it does on defense.
The historian says that crossing this threshold has spelt disaster for empires from Habsburg Spain in the 16th century to Bourbon France in the 18th century.
Ferguson said the US began violating ‘Ferguson’s Law’ for the first time in nearly a century in 2024 when spending on servicing its debt ($1.124trillion) exceeded its defense spending ($1.107trillion).
Ferguson said that this ‘crucial threshold’ tends to destroy a great power’s geopolitical grip and ‘leaves it vulnerable to military challenge.’
America hasn’t seen debt service and defense spending this close since the pre-World War II era of isolationism.
Ferguson – an occasional DailyMail.com columnist – cites the nonpartisan Congressional Budget Office, which says the federal debt will reach nearly 5 percent of US GDP by 2049.
Between 1962 and 1989, defense spending averaged 6.4 percent of GDP, debt service was less than a third of that figure, averaging 1.8 percent.
Following the Cold War, the US was still spending around twice as much on defense as it was on servicing its debt.
‘The fact that the U.S. is currently projected to spend a rising share of its GDP on interest payments and a falling share on defense means that American power is much more fiscally constrained than most people realize,’ Ferguson wrote in the Journal.
Ferguson said that defense spending is unlikely to increase in the years ahead because of the downward pressure of its soaring debt.
He worries the US could be headed to the same place as pre-WWII Britain and the policies of appeasement but says the consequences could be worse, leading to ‘down the path of default, depreciation and imperial decline.’
After the First World War, Britain’s debt service exceeded military spending every year from 1920 to 1936.
The historian argues it was this breach of Ferguson’s Law, much more than trusting Adolf Hitler, that caused Britain to adopt the disastrous appeasement policy which failed to prevent Germany from invading Poland.
After WWII, Britain faced soaring debt and rapidly declined as inflation and low productivity forced successive governments to surrender its colonies and shrink the armed forces.
Ferguson says the US is currently facing a similar geopolitical landscape to Britain as China and Russia threaten to destabilize the world.
But he says, unlike Britain in the 1930s, the US of the 2020s faces four important differences – and all of them are disadvantages.
First, Ferguson notes that the term structure of US debt is shorter – meaning the date it matures comes sooner – which makes it more sensitive to interest fluctuations.
Secondly, more of its debt is in the hands of foreign investors.
Thirdly, the trend of interest rates in the US seems less likely to be downward than it was in 1930s Britain.
Finally, he argues that America today is encumbered by an expensive welfare system which will only become more burdensome as fertility rates decline and life expectancy increase.
Ferguson concludes by saying: ‘In the absence of radical reform of America’s principal entitlement programs – which successive administrations this century have either failed to achieve or ruled out – the only plausible way that the U.S. can come back within the limit of Ferguson’s Law is therefore through a productivity miracle.’