The U.S. national debt represents the total amount the federal government owes, including debt held by the public ($26.5 trillion) and intragovernmental debt ($12.1 trillion, e.g., Social Security trust funds). Annual deficits—when government spending exceeds revenue—add to this debt, with deficits consistently exceeding $1.5 trillion in recent years, including a record $3.1 trillion in 2020. The debt-to-GDP ratio, a key measure of fiscal health, is at its highest since World War II and projected to reach 124% by 2034 if current policies continue.
The U.S. national debt, exceeding $36 trillion as of early 2025, is a growing concern due to its size relative to the economy (122% of GDP) and its unsustainable trajectory.
Spending outpaces revenue due to rising costs of entitlement programs (Social Security, Medicare, Medicaid), which account for $4 trillion annually, driven by an aging population and increasing healthcare costs. Revenues, projected to rise from 17.1% to 19.3% of GDP by 2055, cannot keep up with spending, expected to hit 26.6% of GDP. Major events like the 2008 financial crisis, the Iraq and Afghanistan wars, and the COVID-19 pandemic have led to significant borrowing.
Tax cuts, such as those under Presidents Reagan, Bush, and Trump, have reduced revenue. The 2017 Tax Cuts and Jobs Act is estimated to increase deficits by $55 billion annually if extended without offsets. Rising interest rates have doubled the effective rate on debt from 1.7% to 3.4%, with net interest payments reaching $881 billion in 2024, surpassing spending on Medicare and defense.
High debt levels correlate with slower growth. Studies suggest that debt above 90% of GDP can reduce annual GDP growth from 3–4% to 1.6%. Rising debt crowds out private investment, reducing economic opportunities. Interest cost may become unserviceable and unsustainable as it may exceed $1 trillion in near estimated future by 2034. US has to move money from core public welfare and national priority projects to service the debt.
High debt limits the government’s ability to respond to future crises (e.g., pandemics, wars), as borrowing capacity shrinks. Default is being avoided due to the U.S. acceptability and its dollar’s reserve currency status. However in future a loss of investor confidence, due to decline in US global hegemon status could undermine its financial systems and spike interest rates, trigger inflation, or weaken the dollar’s dominance. Rising debt shifts costs to future generations, reducing their economic prospects.
Modern Monetary Theory (MMT) suggests that the U.S. as a currency issuer, can sustain higher debt levels by printing money, provided inflation remains controlled. However unchecked money printing risks inflation, especially with short-term debt requiring frequent refinancing at higher rates. The U.S.’s ability to borrow at low rates (historically below 1% for 10-year Treasuries) has so far mitigated immediate concerns but rising rates signal growing risk. Debt growth reflects political choices by prioritizing tax cuts and spending over fiscal restraint rather than an inherent economic flaw. Additionally comparing debt to GDP may overstate the problem, as U.S. assets (land, resources, etc.) exceed $200 trillion, dwarfing liabilities.
The One Big Beautiful Bill will significantly reduce deficits and stabilize or lower the national debt. This may lead to deficit reduction of over $2 trillion over ten years. Bill’s “pro-growth” policies (e.g., tax cuts, deregulation) will boost GDP, wages, and revenue, offsetting debt increases. The U.S. national debt will continue to be a complex issue with significant long-term risks, including slower economic growth, rising interest costs, and reduced fiscal flexibility. While immediate crisis is unlikely due to the U.S.’s creditworthiness, the current trajectory is unsustainable. Options like raising revenue, cutting spending, or boosting growth will require political will but delaying concrete action increases risks of economic stability and adds to the burden on future generations.
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