America National Debt Right Now
The United States national debt is the total amount of money the government owes outside lenders. It includes federal loans to businesses, individuals, state and local governments, the Federal Reserve, and foreign investors and banks. The term “national debt” is different from “intragovernmental debt,” which refers to money owed by the government to itself.
In general, the national debt rises when spending increases and revenue decreases. That’s why the national debt increased during the COVID-19 pandemic as the government spent trillions on stimulus checks for citizens and aid for businesses. The America government’s debt is also rising because of tax cuts, including those in the Tax Cuts and Jobs Act that lowered taxes for individual and corporate taxpayers. These cuts reduced overall federal revenue.
When the debt is rising rapidly, it creates a dilemma for policymakers. The government’s budget pie is only so big, so when one area grows (like interest payments) another must shrink (like discretionary programs that help grow the economy and improve people’s lives, like education, veterans benefits and transportation). Increasing interest rates have pushed up debt repayment costs dramatically. The Peterson Foundation estimates that debt repayments are now on track to hit $5.4 trillion over the next thirty years—more than all other mandatory and discretionary spending combined.
What Is the America National Debt Right Now?
Both major political parties agree that debt reduction should be a top priority. However, there is disagreement about how to reduce the deficit and whether it even is possible. Republicans favor large spending cuts, including the elimination of clean energy tax credits and cuts to nondefense government programs. Democrats want to limit military spending and push for more economic growth, including more social services.
Debt levels increase for many reasons, but the most important factor is that federal spending increases when revenues decrease or inflation rises. This happens during recessions or when the Federal Reserve tries to combat inflation sparked by the COVID-19 pandemic. Historically, the debt as a percentage of GDP has declined gradually during periods of sustained economic growth.
The current trend is a concern because of the impact on future generations. If interest rates continue to rise, future budgets are likely to be much higher. That will mean that fewer dollars will be available for investment in areas that can stimulate the economy and improve people’s lives, such as education, research and development, infrastructure, and health care. In 2023, a Pew Research Center survey found that nearly six in 10 Americans think reducing the deficit should be a top priority for Congress and the president.
Adding trillions to the national debt each year will make that task much more difficult. That’s why Congressional leadership is needed to put together a credible plan to reduce the debt. Achieving it will require a combination of steps, including addressing the tax code and increasing revenues through more efficient spending and higher taxes. The Peterson Foundation is leading the way to get this done.