WSJ What’s News - Why Wall Street Is Raising the Alarm Over U.S. Debt

Episode Date: June 3, 2025

P.M. Edition for June 3. As the U.S. debt grows—and with the “big, beautiful” spending bill set to push it even higher—some on Wall Street are warning that the debt level might soon be unsustainable. And, though it’s not the first time we’ve heard such warnings, WSJ investing columnist Spencer Jakab joins to discuss why this time they’re worth listening to. Plus, Elon Musk criticizes President Trump’s tax-and-spending bill, calling it a “disgusting abomination.” And the White House sends a $9.4 billion rescissions package to Congress codifying cuts identified by Musk’s Department of Government Efficiency. WSJ reporter Jasmine Li talks about what the package includes, and the president’s broader goal behind it. Alex Ossola hosts. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

Wendy's most important deal of the day has a fresh lineup. Pick any two breakfast items for $5. New four-piece French toast sticks, bacon or sausage wrap, English muffin sandwiches, value iced coffee, and more. Limited time only at Participating Wendy's Taxes Extra. Elon Musk calls Trump's big beautiful bill a disgusting abomination as the president

seeks Congress' approval for Doge cuts. Plus, why now is the time to listen to Wall Street's alarm over the U.S. debt? Just the interest on the existing debt, not any debt that's going to be accrued in the future, is about $1 trillion a year. That's more than the defense budget, that's more than Medicaid and food stamps and disability insurance all rolled together. And Israeli troops fire at Palestinians heading to an aid distribution site in Gaza.

It's Tuesday, June 3rd. I'm Alex Oseloff for the Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. Former White House cost-cutting czar, Elon Musk, called President Trump's big, beautiful tax and spending package a, quote, disgusting abomination. Posting on his ex-social media platform,

Musk wrote, quote, shame on those who voted for it. You know you did wrong. Musk's latest criticism of the bill comes as the Senate is trying to quickly pass the measure, and as Trump is trying to codify some of the spending cuts rolled out by the Department of Government Efficiency, or DOJ. Asked about Musk's social media post, White House Press Secretary Caroline Levitt told reporters,

Look, the president already knows where Elon Musk stood on this bill. It doesn't change the president's opinion. This is one big, beautiful bill and he's sticking to it. House Speaker Mike Johnson said Musk is terribly wrong. He said the bill is a very important first start in terms of cutting costs and the package will be jet fuel for the economy. Trump hosted Musk at a farewell news conference in the Oval Office last week where the two men heaped praise on each other, aiming to counter the perceptions that their partnership had frayed. Meanwhile, as we said, the White House has sent to Congress a nearly $10 billion rescission

package intended to cut government spending. For more, I'm joined now by WSJ reporter Jasmine Lee. So Jasmine, what is included in some of these cuts? It's a $9.4 billion package and $8.3 billion of that is foreign aid funding. The foreign aid portion includes funding for the U.S. Agency for International Development. That was one of the biggest casualties in the early days of DOGE. And there's also cuts to foreign aid funding for the State Department as well as funds for projects in Africa and AIDS relief. The package would also cut over a billion dollars in funding

for the Corporation for Public Broadcasting. That's the organization that distributes funds to NPR and PBS. This comes after Trump signed an executive order last month to defund public media. Both NPR and PBS filed lawsuits last week alleging that the executive order is unconstitutional and violates federal law. The Trump administration is also weighing using a separate controversial process called

impoundment to clawback funds. What is this and how does it help the White House to do this? So impoundment essentially means Trump would refuse to approve this funding approved by Congress. But there is a law called the Impoundment Act of 1974 that lets Congress review and overturn these cuts. But there is a separate method that has been proposed by Russ Vogt, the director of the White House Office of Management and Budget. He suggested using something called pocket rescissions, which would mean proposing these cuts within 45 days at the end of the fiscal year.

If they don't approve these cuts, the funds would lapse even if Congress doesn't act. What is the broader goal here? What does the administration see as the problem that it's addressing with these moves? A lot of Republicans in Congress have called rescissions a way to codify Doge cuts. So it's sort of a continuation of what Elon Musk has done in the Department of Government Efficiency over the past four months. Recisions is a way to balance that big package out. And this could also be a way to appease

some fiscal conservatives in the Senate. So the timing of this is pretty interesting that this is coming out as the Senate is working through this bill that doesn't cut the deficit. That was WSJ reporter Jasmine Lee. The president's tax and spending bill comes at a time when Wall Street has already been sounding the alarm on U.S. debt. Last week, JPMorgan Chase CEO Jamie Dimon warned of a possible crack in the bond market. Others say that deficit spending and debt levels are so high that they won't be sustainable for much longer.

But is that really true? I'm joined now by WSJ investing columnist Spencer Jacob. Spencer, this is far from the first time that people have been worried about the U.S. debt. In your piece, you note that that's been in the national conversation for more than 50 years. So why should we be worried about this now? There are two sorts of people who weren't worried about this. There are people who have something to sell like gold coins or fishy investment products

who have been worrying about it for way before 50 years. And then there are thoughtful people who look at the escalating numbers and get alarmed. And they've wound up looking foolish very often over the years. And that's precisely because nothing has happened. But now you have many people sounding the alarm all around the same time. Where does the big, beautiful tax and spending bill, which is estimated to add about $3 trillion to the national debt over the next decade. How does that fit into this?

It fits into it in a pretty negative way because if you look at all the government projections that one sees of what's going to happen to debt and deficits, they're already fairly dire, but they have to assume that current law holds. And current law means that the 2017 tax cuts during the first Trump administration would have expired at the end of this year. So things were bad enough there. And the one big, beautiful bill is going to extend them and pile other tax breaks on top of that.

So as written over the next decade, it would add an additional $3 trillion to the debt by one nonpartisan estimate. What is the concern exactly that the national debt can reach a level that the system will kind of stop working? What are they worried about? It's really as much a psychological as a financial problem. Right now, just to give you one scary number, just the interest on the existing debt, not any debt that's going to be accrued in the future, is about

$1 trillion a year. That's more than the defense budget, that's more than Medicaid and food stamps and disability insurance all rolled together. So when you talk about Doge coming in and firing a bunch of federal employees, you could not cut enough spending just to cover just the interest bill on what we owe, much less begin to pay that back and whittle down. And you also at the same time have this trade war going on. And those two things happening at once, the one big beautiful bill act and the trade war, which also is going to hurt growth, lower growth is bad for financing the deficit. And it really is impossible to say when there's a tipping point, but it's a sure thing that there

is one. How would we be able to tell if we're approaching that tipping point? If you were to have foreigners bulk at some of the longer term debt issues, 20 year bonds or something like that, then that would spoof people, the yields would rise and that could become self-perpetuating because the higher the yields are, the more expensive it is to finance the existing debt. The way that it would play out in the United States would be very different than it would in let's say in Argentina or Turkey or Russia. Scott Besson said over the weekend, we are never going to default on our debt. You could believe him, but it doesn't matter because there's an indirect way to default on debt which is is to not be able to have real money buy those bonds. And that's

the real fear. That would be kind of financially the equivalent of defaulting because you would have very rapid inflation if you depended on the Fed to do that for you. That was WSJ investing columnist Spencer Jacob. Thank you, Spencer. Thank you. Coming up, MENA is turning to nuclear power. That's after the break. comes with Volvo's legendary safety. During Volvo Discover Days, enjoy limited time savings as you make plans to cruise through Muscogee or down Toronto's bustling streets.

From now until June 30th, lease a 2025 Volvo XC60 from 1.74% and save up to $4,000. Conditions apply. Visit your GTA Volvo retailer or go to volvocars.ca for full details. Volvo retailer or go to volvocars.ca for full details. To fuel its artificial intelligence ambitions, Meta Platforms is turning to nuclear power. The tech giant will buy the power generation of a nuclear plant in Illinois for 20 years under a deal with Constellation Energy. Financial arrangements weren't disclosed,

but Constellation CEO Joe Dominguez said the meta-deal would help cover the costs of relicensing, upgrades, and maintenance for the Clinton Clean Energy Center in Clinton, Illinois. It's the first deal of its kind in the U.S. with an operating nuclear plant, but it has parallels to one that Constellation and Microsoft struck last year around the Three Mile Island plant in Pennsylvania. And tariffs are good for business at Dollar General. The discount retailer Today reported strong sales in the latest quarter and raised its outlook for the year.

It said it expects sales to rise 3.7% to 4.7% for the fiscal year ending January 30. Dollar General said that tariff-related price increases could put pressure on consumer spending. And when consumers feel pressured, they go to discount chains. The tech-heavy Nasdaq led major U.S. indexes higher today, setting up stocks to continue a healthy start to June. The Nasdaq rose about 0.8 percent, the S&P 500 was up roughly 0.6 percent, and the Dow ended the day about half a percent higher. In international news, Israeli troops shot at Palestinians making their way to an aid

distribution site in southern Gaza. According to Palestinian rescue services and the Gaza Health Ministry, 27 Palestinians were killed and 90 injured at the Al-Alam roundabout in Ra'afa. This marks the second deadly shooting in the same area in a week, as thousands have flocked to aid distribution sites as part of an American-Israeli plan. The Israeli military said some people left the designated route, ignored warning shots, and approached its troops roughly 500 yards from one of the

distribution sites. And the Dutch governing coalition has collapsed after far-right politician Gert Wilders pulled out of the ruling bloc, accusing the other parties of not doing enough to curb immigration. Dutch Prime Minister Dick Schaaf said hours later that he would resign, setting the stage for a snap election that will test whether Vilders, one of Europe's most controversial politicians, can win power. And finally, for more than two years, GLP-1 weight loss drugs like Ozempic and Wigovie were in short supply in the U.S. Now, those shortages seem to be over, but demand and prices for the drugs are still high. Without insurance, consumers can easily pay

at least $1,000 every month for these drugs, though there are programs and potential alternatives that can reduce the cost. But if you're hoping for price drops on these drugs in the future, WSJ contributor Cheryl Winokermonk told our Your Money Briefing podcast that cheaper generics are still a ways off.

These patents don't expire for a number of years and even then when the drug manufacturers change it slightly they can apply for another patent and this could go on for quite a while. But we'll see. President Trump recently signed a sweeping executive order with the goal of cutting prescription drug costs in the U.S. And GLP ones haven't been singled out, but they're likely to be among those targeted for price cuts. And he's made comments before decrying the high cost of these drugs. So as I said, we'll see. For more on this, listen to tomorrow's episode of Your Money Briefing. And that's what's news for this Tuesday afternoon. Additional audio in this episode courtesy of Reuters.

Today's show was produced by Pierre Bienimé and Anthony Bansi, with supervising producer Michael Kosmides. I'm Alex Osila for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.