The Treasury Department this week reported that the total national debt of the United States surpassed $30 trillion for the first time in history, an amount equal to nearly 130% of America’s yearly economic output, known as gross domestic product. The eye-popping figure makes the U.S. one of the most heavily indebted nations in the world.
The federal debt has been high and rising for decades, but the federal government’s response to the coronavirus pandemic, which involved massive infusions of cash into the U.S. economy, greatly accelerated its growth.
At the end of 2019, prior to the pandemic, the national debt stood at $22.7 trillion. One year later, it had risen by an additional $5 trillion, to $27.7 trillion. Since then, the nation has added more than $2 trillion in further debt.
A grim reminder
While the $30 trillion figure, by itself, has no significant meaning, it may serve to focus attention on what some see as a major concern for the future health of the country.
“Hitting the $30 trillion mark is a reminder of just how high our debt is and just how much we’ve been borrowing,” said Marc Goldwein, senior vice president and senior policy director for the Committee for a Responsible Federal Budget.
“Debt held by the public, which is the measure we prefer to use, is about as large as the economy,” Goldwein told VOA. “In a decade, it’ll be larger than any time since World War II. Meanwhile, we have the highest inflation rate we’ve had in 40 years, and there doesn’t seem to be any sign that the borrowing is going to let up.”
The $30 trillion in outstanding debt is owed to a wide variety of creditors, including the federal government itself.
According to the Treasury Department, as of January 31, $6.5 trillion of the national debt was classified as “intragovernmental holdings.” This includes Treasury securities held by various agencies of the federal government, most prominently the Social Security Administration, which maintains a trust fund to provide income to senior citizens.
The far larger portion of the debt is classified as debt held by the public, which amounts to $23.5 trillion. The term “public” can be somewhat misleading because the category includes not just the debt instruments held by individual investors but also the debts held by the Federal Reserve, large investment funds and foreign governments.
According to the Treasury Department, foreign governments hold about $7.7 trillion in U.S. debt, though no country holds more than 5% of the total. As of the end of November, the most recent data available, Japan was the largest foreign holder of U.S. debt, with $1.3 trillion. China was the second-largest holder of U.S. debt, with $1.1 trillion, while the United Kingdom was in distant third place, with $622 billion.
The cost of debt
The cost of servicing the country’s outstanding debt has become a major part of the federal budget as the outstanding debt has grown. In 2021, the government made $562 billion in interest payments on outstanding debt. That is more than the annual budget of every individual federal agency except for the Treasury, the Department of Health and Human Services (which manages the Medicare and Medicaid government health insurance programs), and the Department of Defense.
Surprisingly, during the early part of the pandemic, the federal government’s interest payments fell even as the debt increased, because of a broad decline in interest rates.
However, with the Federal Reserve poised to begin raising interest rates in an attempt to ward off rising inflation, the rate the Treasury has to pay on newly issued debt will likely rise, meaning that the overall cost of servicing the federal debt will likely go up in the relatively near future.
Comparison with other countries
The United States’ ratio of debt to GDP, the measure most commonly used to gauge a country’s level of indebtedness, places it among the most indebted countries in the world.
According to data gathered by the World Bank in October, the country with the world’s highest debt-to-GDP ratio is Japan, which carries debt equivalent to 257% of its economic output. Other developed economies with very high debt-to-GDP ratios include Greece, at 207%, and Italy, at 155%.
With a ratio of 133%, the U.S. is the 12th most indebted country overall, and the fourth most indebted among the developed economies that make up the Organization for Economic Co-operation and Development. The OECD average is an 80% debt-to-GDP ratio.
Both parties added to debt
The national debt is the cumulative total of annual federal deficits. The U.S. has seen federal surpluses in just four of the past 50 years, from 1998 to 2001, encompassing the last three years of the administration of Bill Clinton, a Democrat, and the first year of the administration of George W. Bush, a Republican.
In recent decades, both Democrats and Republicans have contributed to the rising levels of federal borrowing, with the debt increasing on a regular basis, regardless of which party controlled Congress and the White House.
It’s a fact that causes some members of Congress to express frustration with their colleagues over a seeming lack of concern about the problem.
“$30 trillion in debt is an obscene number, but what’s even more depressing is the fact that most politicians in both parties don’t really care,” Senator Ben Sasse, a Nebraska Republican, said in a statement. “Someone is going to have to pay that money when these politicians are long gone, and — spoiler alert — it won’t be paid by them but instead by our kids.”