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The United States national debt is over $37 trillion as of September 2025. This massive debt load equals more than $109,000 for every person in America.
The government borrows money by selling Treasury securities to investors worldwide, creating obligations that must be repaid with interest.
The debt grows daily as the government spends more than it collects in taxes. Interest payments now consume $879.9 billion annually—more than the cost of Medicare or national defense.
What the National Debt Measures
The U.S. Department of the Treasury’s “Debt to the Penny” dataset provides the most precise measure of total national debt at $37.41 trillion. Other tracking sources show similar figures around $37.39 trillion, with research organizations citing “almost $37 trillion.”
The number changes every day as the government borrows to fund its operations.
With approximately 342.4 million Americans, the debt equals over $109,000 per person. This per-capita figure helps illustrate the scale, though individuals don’t directly owe this amount.
Debt vs. Deficit Explained
The Treasury Department uses a credit card analogy to explain the difference between debt and deficit. The deficit is like monthly credit card spending that exceeds payments. The debt is the total balance carried on the card from all previous months.
The deficit measures annual shortfalls between government spending and revenue. In Fiscal Year 2024, the federal government spent $6.75 trillion but collected only $4.92 trillion, creating a $1.83 trillion deficit for that year alone.
The debt accumulates all past deficits minus any surpluses. The U.S. government has run a deficit in all but four years since 1970 (1998-2001), meaning the national debt has grown almost continuously for over half a century.
To cover each year’s deficit, the government borrows money by selling Treasury securities to investors. Each year’s deficit adds to the total national debt.
Two Types of Government Debt
The total national debt consists of two distinct categories: debt held by the public and intragovernmental holdings. These categories have different economic implications and are owed to different entities.
Debt Held by the Public
This represents money the federal government borrowed from outside investors through the open market. These investors include individuals, corporations, state and local governments, foreign governments, and the Federal Reserve.
As of July 2025, debt held by the public stood at $29.53 trillion. This portion has grown dramatically in recent years, increasing by 125% between 2015 and 2025.
The massive government spending required during the COVID-19 pandemic drove much of this surge. Debt held by the public represents direct claims on the nation’s economic output by external creditors, and interest paid on it flows from the Treasury to these investors.
Intragovernmental Holdings
This represents debt the U.S. Treasury owes to other parts of the federal government. It’s not money borrowed from public markets but rather internal accounting of funds borrowed from federal trust funds that collected more revenue than they paid out.
The largest holdings are Social Security trust funds and various military and federal employee retirement funds. These trust funds are required by law to invest their surpluses in special, non-marketable Treasury securities.
As of July 2025, these intragovernmental holdings totaled $7.39 trillion. This debt represents promises to future beneficiaries—retirees and veterans—that their benefits will be paid.
When trust funds need to pay out more in benefits than they collect in revenue, they redeem their Treasury securities. This requires the government to fund those payments through current taxes or additional borrowing from the public.
Intragovernmental holdings have grown more slowly than public debt, increasing by 47% since 2015.
Who Owns America’s Debt
The U.S. government owes money to a diverse group of domestic and foreign creditors who hold Treasury securities. Most debt is held by domestic entities and the American public in various forms.
Domestic Creditors
Investors within the United States own the majority of the national debt. Private investors hold approximately two-thirds of the total debt, around $24.4 trillion.
The Federal Reserve: Through monetary policy operations, particularly quantitative easing, the Federal Reserve held $4.6 trillion as of March 2025, about 12.6% of the total.
Mutual Funds: These investment vehicles held nearly $4.5 trillion (12.4%) as of December 2024.
Banks and Financial Institutions: U.S. banks and similar institutions held nearly $1.9 trillion (5.1%).
State and Local Governments: State and local governments invest their funds in U.S. debt, holding almost $1.7 trillion (4.6%).
Other Domestic Entities: Public and private pension funds hold $955.7 billion, with the remainder held by insurance companies, corporations, and individual American savers who own Treasury securities.
Foreign Creditors
Foreign ownership accounts for a minority share of U.S. debt. As of April 2024, foreign entities held approximately $7.9 trillion in Treasury securities, representing about 22.9% of total U.S. debt.
Foreign governments, central banks, and private investors purchase U.S. debt because it’s considered one of the safest and most liquid investments in the world, backed by the full faith and credit of the U.S. government.
Top foreign holders:
- Japan: ~$1.1 trillion
- China: ~$749 billion
- United Kingdom: ~$690 billion
- Luxembourg: ~$373.5 billion
- Canada: ~$328.7 billion
The composition of foreign ownership has been shifting. While Japan and China have been the largest foreign holders for two decades, their combined share of foreign-owned U.S. debt declined from over 44% between 2003 and 2011 to approximately 25% as of 2023.
This trend indicates diversification of the foreign creditor base, which can enhance stability by reducing potential economic leverage of any single foreign nation.
Major Holders of U.S. National Debt (Approximate Figures, Early 2025)
| Holder Category | Amount Held ($ Trillions) | Percentage of Total Debt |
|---|---|---|
| Debt Held by the Public | ~$29.5 | ~79% |
| Domestic Holders | ||
| Federal Reserve | $4.6 | 12.6% |
| Mutual Funds | $4.5 | 12.4% |
| Banks & Financial Institutions | $1.9 | 5.1% |
| State & Local Governments | $1.7 | 4.6% |
| Pension Funds, Insurers, Individuals, etc. | Varies | Varies |
| Foreign Holders | ~$7.9 | ~23% |
| Japan | $1.1 | 3.1% |
| China | $0.75 | 2.1% |
| United Kingdom | $0.69 | 2.2% |
| Intragovernmental Holdings | ~$7.4 | ~20% |
| Social Security Trust Funds | $2.7 | 7.3% |
| Military & Federal Retirement Funds | $2.2 | 5.9% |
| Medicare Trust Funds | $0.43 | 1.2% |
Historical Context: How America Got Here
The United States has carried national debt since its founding. The initial debt of over $75 million financed the American Revolutionary War.
For most of U.S. history, debt followed a predictable pattern: it would spike sharply to fund major wars and then be gradually paid down during subsequent periods of peace and economic growth.
Early Debt Cycles
Key historical events drove massive increases in borrowing:
The Civil War: The debt exploded by over 4,000%, rising from $65 million in 1860 to nearly $3 billion by 1865.
World War I: Financing the war effort pushed the debt to approximately $22 billion.
World War II: This conflict required unprecedented government spending. As a percentage of economic output, the debt reached its highest point in U.S. history during this period, peaking at over 130%.
Following World War II, strong economic growth allowed the debt to shrink significantly relative to the size of the economy, even as the dollar amount continued to rise.
Modern Debt Growth Patterns
In recent decades, the historical pattern of post-crisis debt reduction has broken down. The debt now grows persistently, regardless of whether the country is at war or in recession. This marks a shift from cyclical, crisis-driven debt to structural, ongoing debt accumulation.
Three major phases have defined accelerated debt growth:
The 1980s and Early 1990s: A combination of sweeping tax cuts under the Reagan administration and significant increases in military spending led to sustained large annual deficits that sharply increased the national debt.
The Great Recession (2008): The 2008 financial crisis triggered deep economic downturn. This simultaneously caused sharp declines in tax revenues and prompted massive government spending on economic stimulus packages like the American Recovery and Reinvestment Act of 2009.
The COVID-19 Pandemic (2020): This led to the most dramatic recent spike in debt. The federal government spent trillions on economic relief measures, including stimulus checks, enhanced unemployment benefits, and business loans. Federal spending increased by approximately 50% between FY2019 and FY2021.
This unprecedented spending pushed the debt to a new post-war high relative to the economy, reaching 133% of GDP in the second quarter of 2020.
This modern pattern reveals a fundamental, long-term imbalance between government revenue streams and spending commitments. Unlike in the past, debt continues to rise rapidly even during periods of economic expansion, indicating that underlying drivers are persistent demographic and programmatic trends, not just temporary emergencies.
Measuring Debt: The GDP Ratio
While the raw dollar amount of national debt is staggering, it can be misleading when viewed alone. A more meaningful metric for analyzing debt over time is the debt-to-Gross Domestic Product (GDP) ratio.
Why GDP Matters
Gross Domestic Product measures the total monetary value of all final goods and services produced within a country’s borders. It’s the most common measure of a country’s overall economic output and health.
As of the second quarter of 2025, U.S. GDP was approximately $30.3 trillion.
The debt-to-GDP ratio compares what the country owes to what it produces annually. This ratio provides better sense of the nation’s ability to handle its debt because it puts debt into context of the economy’s size that ultimately supports it.
Historical Debt-to-GDP Trends
The U.S. debt-to-GDP ratio has fluctuated significantly throughout history:
It reached its all-time peak immediately after World War II, before declining steadily for several decades and hitting a low point in the 1970s.
The ratio began climbing again in the 1980s and has accelerated dramatically since the 2008 financial crisis.
A critical milestone was reached in 2013, when the ratio surpassed 100%. For the first time since World War II, U.S. national debt was larger than its entire annual economic output.
As of mid-2025, the U.S. debt-to-GDP ratio stood at approximately 123%.
Different Economic Conditions Today
While the U.S. successfully managed a high debt-to-GDP ratio in the past, economic and demographic conditions today are fundamentally different. The post-WWII era featured a young, rapidly growing workforce (the Baby Boom), a dominant position in global manufacturing, and relatively low costs for social insurance programs.
These factors created a powerful economic engine that allowed the U.S. to “grow its way out of debt.”
Today, the country faces an aging population, which drives up spending on Social Security and Medicare, slower projected long-term economic growth, and rising interest rates. This suggests that historical parallels may be misleading, and reducing the current high ratio will likely require active policy interventions rather than relying on automatic economic growth.
Rising Interest Costs
One of the most direct and rapidly growing consequences of large national debt is the cost of paying interest on it. Like individuals paying interest on loans, the federal government must pay interest to investors who hold its debt.
Interest as Budget Priority
Interest payments on national debt have become one of the largest expenses for the U.S. government.
In Fiscal Year 2024, the government’s net interest expense was $879.9 billion. This single line item accounted for 13% of all federal expenditures for the year.
Interest on debt is now the third-largest major spending area in the federal budget, trailing only Social Security and overall health care services and research.
Impact of Rising Interest Rates
For more than a decade following the 2008 financial crisis, historically low interest rates helped constrain the government’s borrowing costs, even as total debt continued to grow. That favorable environment has ended.
The average interest rate on all outstanding federal debt has more than doubled, rising from a low of 1.556% in January 2022 to 3.352% as of July 2025. This increase has made interest the fastest-growing part of the federal budget.
The Debt Spiral Risk
This situation creates a dangerous fiscal feedback loop. As total debt grows, interest payments also grow. Higher interest payments are government spending, so they contribute to larger annual deficits.
To cover larger deficits, the government must borrow even more money, which increases total debt and leads to even higher interest payments in the future. Rising interest rates act as a powerful accelerant to this cycle, making inaction on debt increasingly costly over time.
The Crisis Debate
There’s vigorous ongoing debate among economists and policymakers about the severity of the threat posed by national debt. While there’s broad agreement that the current trajectory isn’t sustainable long-term, opinions differ on the urgency of the problem and potential consequences of inaction.
Arguments for Serious Concern
A significant number of experts argue that high and rising national debt poses serious and imminent risks to the U.S. economy and its global standing.
Risk of Fiscal Crisis: The most severe risk is that investors could lose confidence in the U.S. government’s ability to manage its finances. If this happened, they would demand much higher interest rates to continue lending to the Treasury. This could trigger a “debt spiral,” where rising interest costs lead to ever-larger deficits and borrowing, potentially culminating in severe economic crisis.
“Crowding Out” Private Investment: When government borrows on such massive scale, it competes with private businesses for limited capital. This increased competition can drive up interest rates for everyone, making it more expensive for businesses to borrow for new factories, equipment, and research. This “crowding out” of private investment can lead to slower economic growth, reduced productivity, and stagnant wages.
Reduced Fiscal Flexibility: High debt levels leave government with less room to maneuver in future emergencies. If the nation faced another severe recession, global pandemic, or major war, the ability to borrow additional funds to respond effectively could be constrained.
Threat to National Security: Large debt burdens can threaten national security. As interest payments and mandatory spending on entitlement programs consume more of the budget, fewer resources are available for discretionary spending, including defense, intelligence, and diplomacy. Heavy reliance on foreign creditors could theoretically give those nations leverage over U.S. policy.
Arguments for Manageability
Other experts, while acknowledging long-term challenges, argue that the situation isn’t an immediate crisis. This view is largely based on the unique and powerful position the United States holds in the global financial system.
The U.S. Dollar as Reserve Currency: The U.S. dollar is the preeminent currency used in global trade and finance. This creates constant and immense global demand for dollar-denominated assets, chief among them Treasury securities. This allows the U.S. to borrow more easily and at lower interest rates than any other country.
“Safest Asset” Status: In times of global economic turmoil, investors often engage in a “flight to safety,” selling riskier assets and buying U.S. Treasury bonds. Treasury bonds are considered the safest financial asset in the world. This ensures a reliable market for U.S. debt, even in difficult times.
Unparalleled Credibility: The U.S. government has never defaulted on its financial obligations. This perfect track record gives it unparalleled credibility among global investors, who have immense confidence in the government’s ability and willingness to repay its debts.
The Risk Assessment Question
These two sides of the debate aren’t mutually exclusive. The factors that make debt manageable—such as the dollar’s reserve status and investor confidence—are privileges, not permanent features of the global economy.
The core of the debate is risk assessment: how long can the U.S. continue on an unsustainable fiscal path before it erodes the very confidence that makes its debt manageable? The concern is that the tipping point may be reached with little warning.
Personal Impact of National Debt
While national debt may seem like an abstract macroeconomic issue, its effects trickle down and impact ordinary Americans’ financial lives in several tangible ways. The national debt isn’t a bill individuals pay directly, but it functions as an invisible, economy-wide headwind affecting personal finances.
Higher Borrowing Costs
When the federal government borrows trillions of dollars, it significantly increases overall demand for capital in financial markets. This can lead to higher interest rates across the entire economy.
For individuals, this means loans for major life purchases become more expensive. This includes higher interest rates on home mortgages, auto loans, student loans, and credit card debt. As a result, families may have less disposable income to spend on other priorities.
Slower Wage Growth
The same “crowding out” effect that raises borrowing costs for individuals also affects businesses. Higher interest rates can make it more expensive for companies to invest in new equipment, technology, and expansion projects.
This reduction in private investment can lead to lower productivity growth for the economy as a whole. Over time, slower productivity growth translates directly into slower growth in workers’ wages and salaries.
Potential for Higher Taxes
In the long run, there are only two ways for government to stabilize or reduce national debt: cut spending or increase revenue. If policymakers choose to address debt through the revenue side, it could mean higher taxes for individuals and businesses in the future to cover government obligations.
Reduced Government Services
As interest payments consume an increasingly large share of the federal budget, there’s less money available for all other government priorities. This can force difficult choices and lead to cuts in funding for public investments like infrastructure, education, and scientific research.
It also puts pressure on popular benefit programs. To ensure long-term solvency of programs like Social Security and Medicare, future changes could involve reduced benefits or stricter eligibility requirements.
Policy Options for Addressing Debt
Addressing national debt requires making difficult choices, as there are no easy or painless solutions. According to non-partisan sources like the Congressional Budget Office and Government Accountability Office, any serious plan to put the U.S. on a sustainable fiscal path would need some combination of three broad categories: increasing federal revenue, reforming mandatory spending, and reducing discretionary spending.
Increasing Federal Revenue
This category involves raising more money for government, primarily through tax code changes.
Tax Reform: One of the largest options identified by the CBO is to eliminate or limit itemized deductions in the individual income tax code, which could reduce deficits by up to $3.4 trillion over 10 years. Other options include imposing a surtax on high incomes or raising the corporate income tax rate from its current 21%.
New Taxes: Some proposals involve creating new revenue sources. A prominent example is a Value-Added Tax (VAT), a broad-based consumption tax common in most other developed countries. A 5% VAT could raise over $3 trillion over 10 years.
Reforming Mandatory Spending
This category—including Social Security, Medicare, and Medicaid—is the largest and fastest-growing part of the federal budget. It’s considered “mandatory” because it operates on autopilot under existing law and isn’t subject to annual appropriation by Congress.
Health Care: Options focus on slowing federal health care spending growth. These include establishing caps on federal spending for Medicaid, which could save up to $893 billion over 10 years, or modifying payment formulas for private Medicare Advantage plans, which could save up to $1 trillion.
Social Security: To ensure long-term solvency, proposals include gradually raising the full retirement age, changing the formula used to calculate initial benefits, or modifying annual cost-of-living adjustments for beneficiaries.
Reducing Discretionary Spending
This portion of the budget is approved annually by Congress through the appropriations process. It funds all federal agencies, including the military.
Defense Spending: Because the Department of Defense accounts for nearly half of all discretionary spending, it’s a frequent target for proposed cuts. The CBO estimates that various options to reduce the defense budget could save up to $959 billion over 10 years.
Non-Defense Programs: Reductions could also be made to other discretionary spending areas, such as transportation, education, foreign aid, and scientific research.
The Scale Challenge
The sheer scale of the fiscal challenge means no single policy option, or even one entire category of solutions, is sufficient to solve the problem. For example, the projected interest costs alone over the next decade ($13.8 trillion) dwarf potential savings from even the largest individual proposals.
This mathematical reality suggests that achieving a sustainable fiscal path would almost certainly require a comprehensive approach involving politically difficult actions from all three categories: raising taxes, reforming popular entitlement programs, and cutting other government spending.
Summary of Major Deficit Reduction Proposals (CBO Projections)
| Policy Option | Category | Projected 10-Year Savings ($ Billions) |
|---|---|---|
| Eliminate All Itemized Deductions | Revenue | $3,424 |
| Impose a 5% Value-Added Tax (VAT) | Revenue | $3,380 |
| Impose a New 2% Payroll Tax | Revenue | $2,540 |
| Modify Payments to Medicare Advantage Plans | Mandatory Spending | $1,049 |
| Establish Caps on Federal Spending for Medicaid | Mandatory Spending | $893 |
| Reduce the Department of Defense’s Annual Budget | Discretionary Spending | $959 |
Source: Congressional Budget Office, “Options for Reducing the Deficit: 2025 to 2034”
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