March 2025 – Breaking Down the Numbers: The Soaring U.S. National Debt

By Matthew Wisehaupt on March 13, 2025

The U.S. national debt is the total amount of money owed by the federal government. As of January 2025, it stands at $36.16 trillion.¹

The difference between deficit and debt

When the federal government spends more money than it collects in taxes in any given fiscal year (the government’s fiscal year runs from October 1 to September 30), there is a deficit. The opposite of a deficit is a surplus.

To fund its operations when there is a deficit, the government borrows money by selling Treasury notes, bills, bonds, and other securities to investors, paying interest based on the interest rate environment at the time the security is issued. The interest owed to these investors adds to each year’s spending deficit (if any) and further increases the national debt over time.

In the past 50 years, the U.S. has run a deficit 46 times. The last U.S. budget surplus was in 2001. In 2024, the deficit was $1.83 trillion, the third-highest on record. The highest deficit was in 2020 during the pandemic, when it was $3.13 trillion.²

Why is the national debt so high?

There are several reasons for the ballooning national debt. One reason is previous tax cuts and pandemic spending. Another major reason is the increasing cost of Social Security and Medicare, two popular programs that serve a growing demographic of older Americans and make up the two biggest slices of the federal budget pie.³ Cutting spending on these programs is not politically popular, though in theory, future benefits could be trimmed. Military spending also consumes a significant portion of the federal budget.

A category of spending that can’t be cut is the interest the federal government must pay to investors who have purchased Treasury securities, which is consuming an increasing share of the federal budget. This is sometimes referred to as “servicing the national debt.” As of September 2024, $1.13 trillion went toward maintaining the debt, which was 17% of total federal spending in fiscal year 2024.⁴

Comparing a country’s total debt to its gross domestic product (GDP) is typically a better way to gauge a country’s ability to pay down its debt than just looking at the raw debt number. For fiscal year 2024, the U.S. debt-to-GDP ratio was 124%. This was just under the record 126% in 2020.⁵ According to the nonpartisan Congressional Budget Office, based on current spending and revenue projections, the debt-to-GDP ratio is projected to reach 179% by 2054.⁶

Clearly, Congress has work ahead to better balance U.S. revenue and spending.

Projections are based on current conditions, subject to change, and may not come to pass.

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^{6) Congressional Budget Office, 2025}

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