The U.S. Debt and How It Got So Big

The U.S. national debt represents the total amount of outstanding obligations owed by the federal government. As of early 2025, the debt has surpassed $34.9 trillion and is still rising. This figure, tracked daily by the U.S. Treasury, reflects decades of accumulated budget deficits, major spending programs, tax cuts, and economic crises. The well-known U.S. Debt Clock in New York estimates that the country now owes over $100,000 per citizen.

Roughly two-thirds of the total is publicly held debt—money owed to individuals, corporations, pension funds, U.S. banks, state and local governments, and foreign governments that buy Treasury securities. The remaining one-third is intragovernmental debt, which the Treasury owes to various federal departments, most significantly the Social Security Trust Fund.

For decades, Social Security collected more in payroll taxes than it paid out in benefits, accumulating large surpluses. The Treasury effectively borrowed this money through government account securities to fund other federal functions. As millions of baby boomers retire, these obligations come due, meaning the government must find the cash to redeem the securities—usually by raising taxes, increasing borrowing, or cutting spending. In this sense, America’s largest creditor is effectively its own future retirees.

Today, the national debt exceeds the country’s entire annual economic output. The U.S. debt-to-GDP ratio fluctuates but remains near 120%, a historically high level that signals potential challenges in repaying obligations. This marks a dramatic change from the late 1980s, when debt represented about half of U.S. GDP.

Key Takeaways

• The U.S. debt is the total financial obligation owed to public investors and federal government programs.
• Social Security and other trust funds remain among the largest holders of U.S. debt.
• Decades of persistent deficit spending combined with tax cuts have driven the debt steadily upward.
• Without corrective measures, concerns about America's ability to manage its debt could have major implications for the global economy.

Why the U.S. National Debt Has Grown So Large

1. Chronic Federal Budget Deficits

The national debt grows each year the government spends more than it collects in revenue. These annual gaps—budget deficits—accumulate over time.

Presidents often get credit or blame for debt increases during their terms, though Congress ultimately controls spending. Historical trends show:

• Franklin D. Roosevelt oversaw the largest percentage increase in debt—more than 1,000%—primarily due to World War II and New Deal programs.
• Barack Obama added around $8.6 trillion, largely driven by responses to the 2008 financial crisis and recession.
• Donald Trump added about $7.8 trillion, including nearly $3 trillion in stimulus during the COVID-19 pandemic.
• Joe Biden has, as of early 2025, added more than $6 trillion, influenced by pandemic recovery spending, the Infrastructure Investment and Jobs Act, and higher interest costs.

Importantly, the rapid rise in interest rates since 2022 now means the government pays over $1 trillion annually just in interest—more than it spends on national defense—making deficits harder to control.

2. Social Security Trust Fund Borrowing

Every administration has relied on surpluses in Social Security and Medicare trust funds. Instead of investing excess payroll tax revenue for future retirees, the Treasury borrowed it for current spending. This kept interest rates lower and deficits smaller on paper.

But as the massive baby boomer generation retires, these programs begin to run deficits. Social Security trustees now estimate that the Old-Age and Survivors Insurance (OASI) fund may be depleted by 2033. If no reforms occur, benefits would face an approximate 20% automatic cut, forcing the government to rely more heavily on borrowing.

3. Foreign Ownership of U.S. Debt

Countries like China and Japan, along with the U.K., South Korea, and European nations, hold substantial quantities of Treasury securities. They purchase Treasuries because:

1. They want to invest their export earnings in a safe asset.
2. A strong U.S. economy ensures demand for their products.
3. Treasuries are considered the world’s safest long-term investment.

While foreign demand has generally remained stable, China has gradually reduced its holdings. Nevertheless, international confidence in the U.S. financial system keeps interest rates lower than they might otherwise be.

4. Long Periods of Low Interest Rates

For most of the past 15 years, interest rates were historically low, making it cheap for the government to borrow. Even with increasing debt, the burden of interest payments remained manageable.

This changed after 2022, when the Federal Reserve raised rates to combat inflation. The cost of servicing the national debt now represents one of the fastest-growing segments of the federal budget.

5. Repeated Increases in the Debt Ceiling

The U.S. Congress sets a statutory limit on how much the government can borrow. But because spending routinely exceeds revenue, Congress has had to raise or suspend the debt ceiling over 100 times since World War II.

Political standoffs—most notably in 2011, 2013, and 2023—have triggered market volatility and threatened default. In 2023, the Fiscal Responsibility Act suspended the debt ceiling until January 2025, after which new negotiations will again be required.

How the Large U.S. Debt Affects the Economy

Short-Term Benefits

Deficit spending can stimulate economic growth during recessions or emergencies. Federal spending pays for military equipment, public infrastructure, health care, scientific research, and social programs. These expenditures create jobs, support businesses, and help stabilize the economy.

Government spending typically accounts for about 7%–8% of U.S. GDP, meaning it plays a major role in economic performance.

Long-Term Risks

As the debt grows relative to GDP, lenders may demand higher interest to compensate for increased perceived risk. This would further increase federal borrowing costs, potentially crowding out spending on education, infrastructure, and research.

If demand for Treasury securities falls, interest rates would rise even more. A decrease in foreign demand also puts downward pressure on the U.S. dollar, because the value of Treasuries is closely tied to demand for dollars. A weaker dollar makes imports more expensive and could accelerate inflation.

The biggest long-term challenge, however, involves mandatory programs like Social Security and Medicare. As these programs’ trust funds approach depletion, Congress will face difficult choices: raise taxes, reduce benefits, increase borrowing, or some combination of the three.

The Bottom Line

The U.S. national debt has reached unprecedented levels, driven by decades of deficit spending, demographic pressures, tax cuts, rising interest costs, and economic disruptions. Without significant fiscal reforms, the government could eventually face constraints that undermine economic growth and global financial stability.

Policymakers agree that a debt crisis is not imminent—but the window for action is narrowing. As baby boomer retirements accelerate and interest costs soar, the U.S. will need to adopt sustainable strategies to ensure that future generations inherit a stable financial foundation rather than a mounting fiscal burden.