The tax cuts bill currently being debated by the US Senate will add another US$3 trillion (A$4.6 trillion) to US debt. President Donald Trump calls it the “big, beautiful bill”; his erstwhile policy adviser Elon Musk called it a “disgusting abomination”.

Foreign investors have already been rattled by Trump’s upending of the global trade system. The eruption of war in the Middle East would usually lead to “flight to safety” buying of the US dollar, but the dollar has barely budged. That suggests US assets are not seen as the safe haven they used to be.

Greg Combet, chair of Australia’s own sovereign wealth fund, the Future Fund, outlined many of the new risks arising from US policies in a speech on Tuesday.

As investors turn cautious on the US, at some point the surging US debt pile will become unsustainable. That could risk a financial crisis. But at what point does that happen?

When talking about the sustainability of US government debt, we have to distinguish between total debt and public debt.

Public debt is owed to individuals, companies, foreign governments and investors. This accounts for about 80% of total US debt. The remainder is intra-governmental debt held by government agencies and the Federal Reserve.

Public debt is a more correct........

© The Conversation