The United States government owes a significant amount of money due to its large budget deficits over many decades. The total public debt owed by the federal government reached over $31 trillion in early 2022. This equates to over $93,000 owed per citizen. Understanding the scope of U.S. debt and obligations provides critical context on the nation’s fiscal standing and can inform debates on future economic policy.
What is the national debt?
The national debt refers to all money owed by the federal government, accumulated over its entire history. It includes debt held by the public and debt held by government trust funds. Debt held by the public encompasses Treasury securities like T-bills and T-notes purchased by investors. Debt held in trust funds includes obligations like Social Security benefits that the government owes to program recipients.
Current national debt statistics
In November 2022, the total outstanding public debt was approximately:
- $31.4 trillion
- Equal to 114% of annual GDP
- $93,000 per citizen
- $255,000 per taxpayer
This reflects a rapid rise in debt over the past two decades. At the end of 2000, the national debt stood at $5.7 trillion, or 57% of GDP. After running trillion-dollar deficits during the Great Recession, debt accelerated again during the COVID-19 pandemic.
Debt ceilings
Congress sets a debt limit that caps how much debt the Treasury can issue to cover authorized spending. This ceiling has been raised over 100 times since 1940, often after contentious political debate. Exceeding the limit could cause the government to partially default on obligations, with severe economic impacts. The Bipartisan Budget Act of 2019 suspended the debt ceiling until July 2021.
Publicly held vs. intragovernmental debt
Of the $31 trillion in total public debt, around $24 trillion is held by the public. This includes individuals, domestic and foreign corporations, state and local governments, the Federal Reserve, and foreign governments. The remaining $7 trillion is intragovernmental debt, primarily owed to federal trust funds like Social Security, federal employee retirement funds, and the Medicare hospital trust fund.
Foreign holders of U.S. debt
Foreign governments and investors hold over one-third of publicly held U.S. debt. The largest foreign holders as of September 2022 were:
| Country | Holdings in billions |
| Japan | $1,236 |
| China (mainland) | $1,030 |
| United Kingdom | $617 |
| Luxembourg | $315 |
| Ireland | $331 |
While substantial, foreign holdings are well below the majority of U.S. public debt. Federal Reserve purchases of Treasury securities have surpassed China’s holdings in recent years.
Structure of the national debt
The Treasury issues over $10 trillion in marketable securities that are freely traded and must be rolled over regularly:
- Treasury bills – maturities of 1 year or less
- Treasury notes – maturities between 2 to 10 years
- Treasury bonds – maturities of 30 years
In addition, over $5 trillion in nonmarketable intra-governmental debt is issued to trust funds and other federal agencies. Other debt types include inflation-protected TIPS, state & local bonds, and savings bonds.
Costs of the national debt
In fiscal year 2021, the federal government incurred $562 billion in interest payments on debt held by the public. This was equal to 10% of total federal outlays in 2021. Each household effectively paid $4,250 in annual interest costs. Interest rates are a key determinant of debt costs. CBO projects net interest costs will nearly triple over the next decade under current law.
Debt as a percentage of GDP
The debt-to-GDP ratio compares the national debt level to the size of the overall U.S. economy. A higher ratio may indicate a heightened risk of default or other economic impacts. The U.S. public debt ratio peaked at over 120% of GDP in 1946 after World War II. It fell below 40% in the early 1980s but has risen since, accelerating after the Great Recession.
| Year | Debt-to-GDP ratio |
| 1940 | 52% |
| 1980 | 33% |
| 2000 | 58% |
| 2020 | 127% |
Deficits and debt
Annual budget deficits contribute significantly to the national debt. Budget deficits occur when the government spends more than it takes in via taxes and other revenue in a given year. Since 2002, the federal government has run deficits every fiscal year, ranging from over $1 trillion in 2020 and 2009 to $439 billion in 2015. These persistent and rising deficits have quickly added to the debt.
Long-term fiscal challenges
An aging population and rising healthcare costs are projected to place substantial pressure on federal finances in coming decades. The Congressional Budget Office warned in 2021 that large budget deficits would push public debt levels to record highs over the next 30 years if current spending and tax policies continue. Ensuring the long-term sustainability of major entitlement programs like Social Security and Medicare is a major fiscal challenge.
Debt reduction strategies
Strategies proposed to address the national debt include:
- Increasing economic growth – Higher GDP growth could make debt burdens more manageable.
- Tax increases – Raising tax rates or eliminating deductions could generate more revenue.
- Spending cuts – Reducing or capping federal spending across agencies and programs.
- Entitlement reform – Changes to Social Security and Medicare to reduce costs.
- Inflation – Higher inflation effectively decreases debt burdens over time.
However, debt reduction remains highly complex and politically contentious. Rising partisanship and lack of consensus on fiscal policy have slowed efforts to address long-term debt projections.
Risks of high national debt
While debt allows fiscal stimulus in tough times, persistently high debt levels pose potential risks, including:
- Higher interest costs – More taxpayer money diverted to pay interest rather than public services.
- Crowding out – Heavy government borrowing competes with business investment.
- Reduced policy flexibility – High debt leaves little room for stimulus in future crises.
- Gradual inflation – Printing money to repay debt could spur inflation.
- Sudden crisis – Investors could rapidly lose appetite for U.S. debt, triggering crisis.
However, the global reserve currency status of the U.S. dollar allows American debt markets to absorb higher debt loads than many other nations.
Historical perspective on debt
While $31 trillion in debt is objectively massive, the economy that supports U.S. debt is also historically enormous. Debt as a share of GDP peaked at over 120% after World War II. While today’s debt ratios are high, the global economic power of the modern U.S. provides key advantages:
- Large, productive economy
- Strong institutional stability
- reserve currency status
- depth of capital markets
This context helps explain why in 2022, despite $31 trillion in debt, the U.S. still maintained its coveted AAA/Aaa sovereign credit rating with Moody’s and S&P.
Unfunded obligations
In addition to the national debt, the federal government has accrued over $100 trillion in unfunded liabilities according to some estimates. These include future Social Security, Medicare, and federal employee benefits earned to date. While not technically counted in the national debt, these obligations raise the specter of deeper fiscal challenges and may impact long-term economic competitiveness if not addressed.
State and local debt
The national debt captures federal government borrowing only. Over $3 trillion in debt is owed by U.S. state and local governments as well. However, unlike the federal government, all 50 states except Vermont have some form of balanced budget requirement. This helps restrain deficit spending and borrowing at state and local levels relative to federal practices.
Consumer debt
Total household debt in the U.S. reached $16.15 trillion in Q2 2022, including over $1.5 trillion in student loans. Credit card, auto, and mortgage debt are also at historically high levels for consumers. This underscores how leveraged not just the government but also U.S. households have become in the decades since the 1980s.
Corporate debt
U.S. business debt exceeds $18 trillion across bonds and loans. However, strong corporate profitability provides a buffer, with debt well below equity market capitalization and cash holdings for most firms. Still, high corporate debt bears monitoring as interest rates rise.
Global debt trends
Debt has risen sharply across advanced and developing economies since 2000. U.S. debt as a share of GDP is below Japan’s 266% and only slightly higher than the UK’s 116%. However, Greece, Italy, Portugal, and other southern European nations have faced more turmoil from excessive borrowing. Rapid debt accumulation in China also poses global risks. Overall, these trends underscore the widespread reliance on debt across modern economies.
The road ahead
While no magic threshold exists, debt burdens cannot rise indefinitely. At some point, investors could demand much higher rates of return for taking on U.S. debt risks, triggering a fiscal crisis. Putting the debt trajectory on a sustainable path requires difficult trade-offs between higher taxes, less spending, and stronger economic growth. With demographic challenges looming, taking steps sooner rather than later to shore up America’s fiscal position can help secure a prosperous future.