The U.S. debt now exceeds the country's GDP. Should we worry?
America's national debt has surpassed the country's gross domestic product for the first time since World War II, marking a stark increase in the government's fiscal burden.
Debt
held by the public represents the amount owed to parties outside the
federal government, such as businesses, individuals, state or local
governments, and foreign countries. The nation's gross debt — which
includes money the federal government owes to itself — is approaching
$39 trillion, according to U.S. Treasury data.
The question is whether that burgeoning debt augurs potential
financial calamity, or is manageable for a nation with a growing, still
dynamic economy. Although the picture may remain unclear for years,
fiscal hawks like the Committee for a Responsible Federal Budget are
sounding the alarm.
What's causing the surge in U.S. debt?
The
nation's debt has swelled since the 2008-09 global financial crisis,
when it hovered at around $5 trillion. At the heart of the issue is a
mismatch between revenue and spending, according to the Peterson
Foundation.
In other words, the U.S. is steadily spending more
than it takes in through tax revenue and other sources, requiring the
government to issue more debt to finance federal programs.
How fast is the debt climbing?
Federal
debt is forecast to continue rising over the next decade, with the
Congressional Budget Office projecting that debt held by the public will
reach $53 trillion in 2036. Debt is forecast to rise from roughly 101%
of U.S. GDP this year to 120% in 2036, exceeding its previous high of
106% in 1946, the agency said in a February report.
To be sure, that forecast represents a set of policy choices — not
immutable economic forces. Some experts say the U.S. could steady the
ship by exerting fiscal discipline. For instance, the Committee for a
Responsible Federal Budget on Monday proposed reducing the deficit — the gap between federal spending and tax revenue — to 3% of GDP, or roughly half its current level.
That
would "put the debt-to-GDP ratio on a downward path with a bit of
wiggle room," the group said. "A 3% of GDP deficit target offers a
credible and achievable path forward to stabilizing the debt, growing
the economy, preserving fiscal flexibility and bolstering market
confidence in the nation's finances."
What are the risks?
The
nation's rising debt could lead to a host of economic problems,
according to the Peterson Foundation. Those include rising interest
costs, which could crowd out spending on federal programs, and a greater
risk of a financial crisis, according to economists. Investors could
also lose confidence in the nation's fiscal stability, leading to U.S.
credit downgrades.
Running up more debt also puts upward pressure on prices, which means everyday costs rise for American households, according to the Yale Budget Lab.
"The
current federal debt is clearly unsustainable, no matter how many times
the debt ceiling is raised," ALEC's Williams told CBS News. "If
Congress doesn't start implementing fiscally responsible policies in a
nonpartisan fashion, Americans will pay the price in higher taxes and
slowed economic growth and in the form of ugly price inflation."
What are markets signaling?
Some
experts point out that the U.S. boasts a vibrant, growing economy with a
strong credit rating, meaning that while rising debt is a concern, it's
nothing the U.S. can't handle — at least for now.
Notably, the
economy has grown at a faster rate than the average interest paid on
debt during four of the last five years, a "positive gap that should
keep the growth of the debt-to-GDP ratio in check," Jacob Manoukian,
U.S. head of investment strategy at JPMorgan Chase, wrote in a 2025 report.
And there's also little evidence that interest payments could become
so large that they "overwhelm monetary policy and contribute to greater
inflation," he added.
In the meantime, U.S. debt remains in high
demand, signaling that investors don't see any immediate danger in the
nation's fiscal situation.
"Households (both directly and through
mutual funds) and foreign investors have remained avid buyers of newly
issued U.S. debt," Manoukian said.