Treasury Report Doesn’t Declare US Government “Insolvent” Despite Viral Claims

A viral claim circulating on social media suggesting that the U.S. Treasury has declared the federal government “insolvent” is misleading, according to financial and policy experts. The assertion stems from a March opinion piece published in Fortune magazine, not from any official Treasury announcement.

Economists Steve Hanke of Johns Hopkins University and David Walker, a former U.S. comptroller general, authored the opinion piece that sparked the viral claims. The authors pointed to the Treasury’s financial report for fiscal year 2025, noting that the government’s liabilities of nearly $48 trillion far exceeded its assets of just over $6 trillion.

From these figures, they concluded, “The U.S. government is insolvent. That’s not hyperbole — it’s the conclusion drawn directly from the Treasury Department’s own consolidated financial statements.” The headline—”The Treasury just declared the U.S. insolvent. The media missed it”—subsequently fueled widespread social media posts suggesting a major, unreported financial development.

However, experts clarify that no such declaration was made by the Treasury Department.

“The U.S. Treasury did not declare the U.S. government insolvent,” explained Kent Smetters, faculty director of the Penn Wharton Budget Model. Smetters noted that while he agrees with concerns about fiscal policy imbalances, the characterization of insolvency misrepresents the government’s financial position.

Jessica Riedl, a budget and tax fellow at the Brookings Institution, pointed out that the economists applied business accounting standards to government finances without acknowledging a critical difference—the government’s authority to levy taxes. “If they didn’t have the power to tax, that would be a problem,” Riedl said.

The Treasury report itself addresses this distinction directly: “Due to its sovereign power to tax and borrow, and the country’s wide economic base, the government has unique access to financial resources through generating tax revenues and issuing federal debt securities.”

This power fundamentally differentiates government finances from household or business accounting. As Smetters explained, “The government’s assets are beyond just its holdings of property and buildings… It’s really the fact that it has access to a tax base that’s still pretty large in present value.”

Steve Ellis, president of the nonpartisan budget watchdog Taxpayers for Common Sense, added historical context: “Except for a short time in Andrew Jackson’s presidency the country has always been in debt. Even when there was brief surplus in late 90s, early aughts, there was still debt.”

While experts dismiss the insolvency claim, they unanimously express concern about the long-term fiscal trajectory. The debt held by the public currently stands at $31.4 trillion as of early April. The Congressional Budget Office projects the fiscal year 2026 deficit will reach $1.9 trillion, growing to $3.1 trillion by 2036.

“The real problem facing the government is that we currently have a fiscal policy path that is itself imbalanced,” Smetters said. “Specifically, the present value of future spending far exceeds the present value of future tax revenue.” He calculated that balancing this would require either raising all federal income taxes by 30%, cutting all federal spending by 25%, or some combination thereof.

Importantly, the government’s liabilities exceeding its assets is not a new development. Treasury annual reports going back decades have consistently shown this pattern, making the recent viral claims particularly misleading in suggesting a sudden crisis or new declaration.

The circulation of these claims highlights the challenges of financial literacy in public discourse, especially when complex fiscal concepts become simplified and sensationalized on social media platforms.