The U.S. national debt has reached unprecedented levels, standing at approximately $36.2 trillion as of May 2025, equivalent to about 124.3% of GDP. This figure comprises two main components: debt held by the public ($28.95 trillion, or roughly 80% of the total) and intragovernmental debt ($7.26 trillion, or 20%), which includes funds borrowed from federal trust funds like Social Security. The debt has grown rapidly, increasing by $1.56 trillion over the past year and $10.29 trillion over the past five years, driven primarily by structural deficits, rising healthcare costs, an aging population, and escalating interest payments.
Key Drivers of Debt Growth
1 Structural Deficits: The federal government consistently spends more than it collects in revenue. For instance, in May 2025, the monthly deficit was $316 billion, down slightly from $347 billion in May 2024, but the fiscal year 2025 deficit remains higher than the previous year’s. The Congressional Budget Office (CBO) projects federal spending to rise from 23.3% of GDP in 2025 to 26.6% by 2055, while revenues lag, increasing from 17.1% to 19.3% over the same period.
2 Interest Costs: Interest payments on the debt are soaring due to higher interest rates and growing debt levels. In 2024, interest costs reached $881 billion, surpassing most federal budget categories, and are projected to hit $952 billion in 2025 and $1.8 trillion by 2035. The average interest rate on marketable debt was 3.362% in May 2025, up from 1.843% five years ago. Posts on X highlight concern, noting interest payments are nearing 4.6% of GDP, the highest among developed economies.
3 Major Events: Historical spikes in debt often tie to crises. The COVID-19 pandemic, wars in Afghanistan and Iraq, and the Great Recession significantly increased borrowing. For example, the American Rescue Plan (2021) added $1.9 trillion to the deficit through 2031.
4 Demographics and Healthcare: An aging population and rising healthcare costs are key long-term drivers. CBO estimates federal spending on Medicare and Medicaid will grow from 5.8% of GDP in 2025 to 8.1% by 2055.
Economic and Fiscal Implications
• Debt-to-GDP Ratio: At 124.3% in 2024, the debt-to-GDP ratio is near its post-World War II peak of 127.7%. CBO projects it could reach 129% by 2034 if current trends continue, especially with proposed tax and spending policies. High debt levels may constrain economic growth, as some economists argue debt above 90% of GDP can reduce GDP growth from 3-4% to 1.6% annually, though this is debated.
• Interest Rate Pressure: Rising interest rates since 2022 have increased debt servicing costs. The Federal Reserve’s rate hikes to combat inflation pushed the average interest rate on federal debt to 3.28% by December 2024, double the 2020 rate. This crowds out other federal spending, limiting investments in infrastructure or social programs.
• Foreign Ownership: Foreign investors hold about $7.7 trillion (26.6% of publicly held debt), with Japan ($1.2 trillion) and China ($1.1 trillion) as top holders. Reduced foreign demand, partly due to trade tensions, may increase reliance on domestic investors, potentially pushing up interest rates.
• Credit Rating Risks: Moody’s downgraded the U.S. credit rating in 2025, citing unsustainable debt and high interest costs. Fitch also downgraded the U.S. in 2023 due to fiscal concerns.
Current Sentiment and Policy Debates
• Political Dynamics: Both parties contribute to debt growth, with recent analyses showing near-equal responsibility. The Biden administration claims a $1.7 trillion deficit reduction from 2020 to 2022, largely due to expiring COVID-19 measures, not structural fixes. Meanwhile, proposed Republican tax and spending bills could add $2.4-$3.0 trillion to the debt by 2034, potentially pushing debt-to-GDP to 125-129%.
• Debt Ceiling: Reinstated on January 2, 2025, at $36.1 trillion, the debt ceiling looms as a political flashpoint. The Treasury is using “extraordinary measures” to avoid default, but a resolution is needed by mid-2025.
• Public Concern: A 2023 Pew survey found 57% of Americans prioritize deficit reduction, up from 45% in 2022. Posts on X reflect alarm, with some warning of a potential default within four years due to refinancing challenges and declining foreign demand for Treasuries.
Potential Solutions
Economists like Ray Dalio suggest three levers to reduce deficits to a sustainable 3% of GDP: cutting spending, raising taxes, or lowering interest rates. Past proposals like the Simpson-Bowles plan and Domenici-Rivlin Task Force advocated balanced approaches, including spending caps, revenue increases, and Social Security reforms. However, political gridlock and short-term focus hinder progress.
Critical Perspective
While establishment narratives emphasize the debt’s unsustainability, some argue the U.S.’s ability to print its own currency mitigates default risks, unlike other nations. However, this can fuel inflation, eroding purchasing power. The debate over whether high debt inherently slows growth remains unresolved, with critics like Paul Krugman arguing low growth may drive debt, not vice versa. Still, rising interest costs and foreign creditor dynamics pose real risks, especially if confidence in U.S. markets wanes.
For further details, check the U.S. Treasury’s Fiscal Data page (https://fiscaldata.treasury.gov) or the Congressional Budge