While the likelihood of a fiscal crisis currently remains low, the national debt is now as large as the entire U.S. economy, and the risk is increasing as the country accumulates debt faster than ever. A new report from the nonpartisan Committee for a Responsible Federal Budget (CRFB) explores six different ways that America’s unsustainably rising debt could lead to a crisis. While each crisis is defined independently, CRFB notes that several could happen simultaneously.

1. A financial crisis — a severe, rapid decline in the value of financial assets that diminishes trust in financial institutions — could be triggered by investors losing confidence in the country’s ability to pay off the debt, leading to sharp spikes in interest rates and triggering panic.
2. An inflation crisis — a period of rapid, sustained, and widespread increases in the prices of goods and services — could occur if the Federal Reserve took steps to absorb the increasing supply of Treasury bills and bonds required to fund the debt.
3. Deficit reduction is a necessary tactic to stabilize the debt. However, excessively large and abrupt deficit reduction could lead to an austerity crisis, which is when governments implement severe, sudden tax hikes and spending cuts to manage high debt.
4. The rising debt can weaken the U.S. dollar through irresponsible fiscal policy and high inflation, creating a currency crisis, when a nation's currency experiences a rapid, significant decline in value.
5. A default crisis — when a government fails to meet its legal debt obligations— could arise if the federal government fails to make interest or principal payments, or restructure existing debt.
6. Rather than lead to an acute crisis, the rising debt could erode living standards over time, resulting in a gradual crisis that may be more difficult to address than a sharp crisis.

The CRFB report outlines the clear risk that the national debt presents to our economic future, but the good news is that there are many available solutions for policymakers to help right the ship and put us on a stronger path.