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National debt is the outstanding financial obligations of a country. The national debt of the United States is what the federal government owes to its creditors.
The U.S. has always carried national debt, and the majority of presidents have added to it. However, total national debt has been expanding rapidly since 2008 due to a combination of increased government spending and failure to raise taxes.
Key Takeaways
- As of May 2025, the U.S. national debt was over $36.2 trillion.
- Tax cuts, stimulus programs, and increased government spending on defense can cause the national debt to rise sharply.
- Looking at the debt-to-gross-national-product ratio of a country shows whether the nation can pay back its debt.
- The U.S. periodically hits its debt limit; the ceiling can be raised or temporarily suspended.
Understanding the National Debt
The federal government borrows money to cover outstanding expenses that accumulate over time. Funds for federal spending are mainly generated by collecting taxes on personal and corporate income, payroll earnings, and borrowing.
The government then spends this money on programs such as Social Security, healthcare, education, infrastructure, and national defense. When the government spends less than the revenue collected through taxes, there is a budget surplus. When government spending exceeds its revenue, the result is a budget deficit.
To pay for this deficit, the U.S. Treasury borrows money by issuing Treasury bills, notes, and bonds. These can be purchased by investors, financial institutions such as banks and insurers, the Federal Reserve, and other foreign central banks.
The national debt, which is also referred to as government, federal, or public debt, is made up of this borrowing along with the interest owed to investors who purchased these Treasury securities.
Fast Fact
As of May 2025, the U.S. national debt exceeded $36.2 trillion.
The Growing National Debt
The U.S. has carried debt since it was founded. In fact, the U.S. accumulated more than $75 million in debt during the Revolutionary War, and that increased to over $2 billion by the end of the Civil War in 1865.
Major economic and political events usually trigger an increase in the national debt. Recent events that caused a spike in debt levels include the wars in Afghanistan and Iraq, the Great Recession, and the COVID-19 pandemic. Military spending reached record levels of more than $600 billion during the wars in Afghanistan and Iraq.
Government spending on relief measures during times of economic turmoil, such as the Great Recession and COVID-19, also causes an increase in the national debt. For example, former President Barack Obama’s American Recovery and Reinvestment Act (ARRA) was a $831 billion fiscal stimulus aimed at restoring jobs during the 2008 recession.
Spending also increased under President Donald Trump during his first term by about 50% from fiscal year 2019 to fiscal year 2021. This was largely driven by tax cuts and COVID-19 relief measures. Those types of moves, along with increased government spending and decreased tax revenue from high levels of unemployment, can generally cause the national debt to rise sharply.
Spending decisions made by the president in office also affect the national debt level. A president’s actions to direct government spending toward national defense, healthcare, education, or fiscal stimulus packages can increase debt levels. However, the president can’t always control these decisions as they may be made in response to unforeseen events like a war, pandemic, or recession.
| End of Fiscal Year | Debt (in Billions, Rounded) | Major Events by Presidential Term |
|---|---|---|
| 1929 | $17 | Market crash |
| 1930 | $16 | Smoot-Hawley Tariff Act reduced trade |
| 1931 | $17 | Dust Bowl drought raged |
| 1932 | $20 | Hoover raised taxes |
| 1933 | $23 | New Deal increased GDP and debt |
| 1934 | $27 | |
| 1935 | $29 | Social Security |
| 1936 | $34 | Tax hikes renewed Great Depression |
| 1937 | $36 | Third New Deal |
| 1938 | $37 | Dust Bowl ended |
| 1939 | $40 | Depression ended |
| 1940 | $43 | FDR increased spending and raised taxes |
| 1941 | $49 | U.S. entered World War II |
| 1942 | $72 | Defense tripled |
| 1943 | $137 | |
| 1944 | $201 | Bretton Woods Agreement |
| 1945 | $259 | World War II ended |
| 1946 | $269 | Truman’s first-term budgets and recession |
| 1947 | $258 | Cold War |
| 1948 | $252 | Recession |
| 1949 | $253 | Recession |
| 1950 | $257 | Korean War boosted growth and debt |
| 1951 | $255 | |
| 1952 | $259 | |
| 1953 | $266 | Recession when war ended |
| 1954 | $271 | Eisenhower’s budgets and recession |
| 1955 | $274 | |
| 1956 | $273 | |
| 1957 | $271 | Recession |
| 1958 | $276 | Eisenhower’s 2nd term and recession |
| 1959 | $285 | Fed raised rates |
| 1960 | $286 | Recession |
| 1961 | $289 | Bay of Pigs |
| 1962 | $298 | JFK budgets and Cuban Missile Crisis |
| 1963 | $306 | U.S. aids Vietnam; JFK killed |
| 1964 | $312 | LBJ’s budgets and war on poverty |
| 1965 | $317 | U.S. entered Vietnam War |
| 1966 | $320 | |
| 1967 | $326 | |
| 1968 | $348 | |
| 1969 | $354 | Nixon took office |
| 1970 | $371 | Recession |
| 1971 | $398 | Wage-price controls |
| 1972 | $427 | Stagflation |
| 1973 | $458 | Nixon ended gold standard; OPEC oil embargo |
| 1974 | $475 | Watergate; Nixon resigns; budget process created |
| 1975 | $533 | Vietnam War ended |
| 1976 | $620 | Stagflation |
| 1977 | $699 | Stagflation |
| 1978 | $772 | Carter budgets and recession |
| 1979 | $827 | |
| 1980 | $908 | Fed Chairman Volcker raised fed rate to 20% |
| 1981 | $998 | Reagan tax cut |
| 1982 | $1,142 | Reagan increased spending |
| 1983 | $1,377 | Jobless rate 10.8% |
| 1984 | $1,572 | Increased defense spending |
| 1985 | $1,823 | |
| 1986 | $2,125 | Reagan lowered taxes |
| 1987 | $2,350 | Market crash |
| 1988 | $2,602 | Fed raised rates |
| 1989 | $2,857 | S&L Crisis |
| 1990 | $3,233 | First Iraq War |
| 1991 | $3,665 | Recession |
| 1992 | $4,065 | |
| 1993 | $4,411 | Omnibus Budget Reconciliation Act |
| 1994 | $4,693 | Clinton budgets |
| 1995 | $4,974 | |
| 1996 | $5,225 | Welfare reform |
| 1997 | $5,413 | |
| 1998 | $5,526 | Long-Term Capital Management crisis; recession |
| 1999 | $5,656 | Glass-Steagall Act repealed |
| 2000 | $5,674 | Budget surplus |
| 2001 | $5,807 | 9/11 attacks; Economic Growth and Tax Relief Reconciliation Act |
| 2002 | $6,228 | War on Terror |
| 2003 | $6,783 | Jobs and Growth Tax Relief Reconciliation Act; second Iraq War |
| 2004 | $7,379 | Second Iraq War |
| 2005 | $7,933 | Bankruptcy Act; Hurricane Katrina |
| 2006 | $8,507 | Bernanke chaired Fed |
| 2007 | $9,008 | Banks crisis |
| 2008 | $10,025 | Bank bailouts; quantitative easing (QE) |
| 2009 | $11,910 | Bailout cost $250 billion; American Recovery and Reinvestment Act (ARRA) added $242 billion |
| 2010 | $13,562 | ARRA added $400B; payroll tax holiday ended; Obama tax cuts; Affordable Care Act; Simpson-Bowles debt reduction plan |
| 2011 | $14,790 | Debt crisis, recession, and tax cuts reduced revenue |
| 2012 | $16,066 | Fiscal cliff |
| 2013 | $16,738 | Sequester; government shutdown |
| 2014 | $17,824 | QE ended; debt ceiling crisis |
| 2015 | $18,151 | Oil prices fell |
| 2016 | $19,573 | Brexit |
| 2017 | $20,245 | Congress raised the debt ceiling |
| 2018 | $21,516 | Trump tax cuts |
| 2019 | $22,719 | Trade wars |
| 2020 | $26,945 | COVID-19 and recession |
| 2021 | $28,428 | COVID-19 and American Rescue Plan Act |
| 2022 | $30,928 | Inflation Reduction Act |
| 2023 | $33,167 | Rising interest rates |
| 2024 | $35,464 | Credit rating downgrade |
Source: U.S. Treasury
Debt-to-GDP Ratio
The debt-to-GDP ratio is the ratio of a country’s public debt to its gross domestic product (GDP).
Looking at a country’s debt compared with its GDP is similar to a lender looking at someone’s credit history—it reveals how likely the country is to pay back its debt.
The debt-to-GDP ratio is usually expressed as a percentage and is used as a reliable indicator of a country’s economic situation, because it compares what the country owes to what it produces, in turn showing its ability to repay the debt. The higher a country’s debt-to-GDP ratio, the less likely the country is to pay off its debt. This also puts the country at higher risk of default, which is concerning to investors as it could cause financial panic in domestic and international markets.
According to a study by the World Bank, countries with a debt-to-GDP ratio above 77% for a prolonged period experience significant slowdowns in economic growth. As of the end of 2024, the U.S. debt-to-GDP ratio was 121.85%. The U.S. debt-to-GDP ratio has been above 77% since 2009, following the financial crisis that started in 2007.
Tip
Don’t confuse the terms debt and deficit. While they may seem similar, they are separate. Debt is the running total of what the government owes to its creditors, including budget deficits and surpluses.
Types of Debt Included in the National Debt
There are different types of debt that comprise the national debt. We’ve highlighted some of them below.
Marketable and Nonmarketable Securities
Marketable securities such as Treasury bills, bonds, notes, and Treasury Inflation-Protected Securities (TIPS) can be traded on the secondary market, and their ownership can be transferred from one person or entity to another.
Nonmarketable securities, which include savings bonds, government account series, and state and local government series, can’t be sold to other investors.
Debt Held by the Public
The U.S. federal debt is mainly held by the American public, followed by foreign governments, U.S. banks, and investors. This portion of the debt held by the public doesn’t include U.S. debt held by the federal government or intragovernmental debt. Debt held by the public includes individuals, corporations, state or local governments, Federal Reserve banks, foreign investors and governments, and other entities outside the U.S. government.
121%
The increase in the U.S. national debt since 2015. One of the main causes of the jump in publicly held federal debt was the increased funding of programs and services during the COVID-19 pandemic.
Intragovernmental Debt
Intragovernmental debt is debt held by the government itself. It is what one part of the government owes to another part.
Intragovernmental debt hasn’t increased as sharply as publicly held debt over the past decade because it mainly includes debt on federal programs’ surplus revenue invested in Treasury debt.
Fast Fact
The U.S. national debt doesn’t include debt carried by state and local governments, or personal debt carried by individuals, such as credit cards and mortgages.
Tracking, Maintaining, and Managing the National Debt
The Bureau of the Fiscal Service provides accounting and reporting services for the government and manages all federal payments and collections. One of the Fiscal Service’s main roles is to track and report the national debt.
Like the rest of us, the federal government is also charged interest for borrowing money. How much interest the government pays depends on the total national debt and the interest rates of different securities. When the target range for the federal funds rate (fed rate) is increased by the Federal Open Market Committee (FOMC), carrying debt becomes more expensive for the government, too.
Interest expenses have been relatively stable despite debt rising every year over the past decade, thanks to low interest rates. However, when interest rates increase, maintaining the national debt gets more costly. For example, the Federal Reserve repeatedly raised benchmark interest rates in 2022 and 2023 to cool high inflation, and the Peter G. Peterson Foundation speculated that the U.S. could pay as much as $1 trillion more on interest payments for the national debt in the 2020s.
The Treasury’s main goal when managing national debt is to ensure that the federal government is able to borrow at the lowest cost over time. The Treasury does this by offering marketable securities that are attractive to a wide variety of investors because they are safe and liquid.
Important
Financial markets that change constantly, uncertainty about future borrowing needs, and the debt limit make the Treasury’s debt management efforts challenging.
The Treasury needs to consider the amount of securities it offers to investors in the context of what’s happening in the financial markets and to be prepared for policy changes and economic events that could significantly affect federal cash flow and borrowing needs.
The Debt Ceiling
The debt ceiling, or debt limit, is the maximum amount that the U.S. government can borrow by issuing bonds. When the debt ceiling is reached, the Treasury must find other ways to pay expenses.
If what the federal government owes reaches the debt limit, and that limit is not raised, there is a risk that the U.S. will default on its debt. This sounds alarm bells for investors because that could have severe consequences for national and global markets. To avoid the risk of default, the debt ceiling needs to be raised by Congress, which has been done many times.
Who Owns Over 70% of the US Debt?
Most of the U.S. national debt is held by the Federal Reserve System, mutual funds, depository institutions, state and local governments, pension funds, insurance companies, and other domestic holders.
How Much Is the US’s National Debt?
As of May 2025, the U.S. national debt was over $36.2 trillion.
Who Is the Largest Contributor to the National Debt?
Government spending outweighs revenues, and most of it goes to Social Security, Medicare, and Medicaid.
The Bottom Line
The national debt is the total amount of money that a country owes to its creditors. The government spends money on programs such as healthcare, education, and Social Security, and accumulates debt by borrowing to cover the outstanding balance of expenses incurred over time. Major economic and political events, such as recessions, wars, or pandemics, can affect government spending.
