Fiscal Data Explains the National Debt (2024)

Key Takeaways

The national debt is composed of distinct types of debt, similar to an individual whose debt may consist of a mortgage, car loan, and credit cards. The different types of debt include non-marketable or marketable securities and whether it is debt held by the public or debt held by the government itself (known as intragovernmental).

The U.S. has carried debt since its inception. Debts incurred during the American Revolutionary War amounted to $75 million, primarily borrowed from domestic investors and the French Government for war materials.

The national debt enables the federal government to pay for important programs and services for the American public.

The National Debt Explained

The national debt is the amount of money the federal government has borrowed to cover the outstanding balance of expenses incurred over time. In a given fiscal year (FY), when spending (ex. money for roadways) exceeds revenue (ex. money from federal income tax), a budget deficit results. To pay for this deficit, the federal government borrows money by selling marketable securities such as Treasury bonds, bills, notes, floating rate notes, and Treasury inflation-protected securities (TIPS). The national debt is the accumulation of this borrowing along with associated interest owed to the investors who purchased these securities. As the federal government experiences reoccurring deficits, which is common, the national debt grows.

Simply put, the national debt is similar to a person using a credit card for purchases and not paying off the full balance each month. The cost of purchases exceeding the amount paid off represents a deficit, while accumulated deficits over time represents a person’s overall debt.

The U.S. Treasury uses the terms “national debt,” “federal debt,” and “public debt” interchangeably.

Year 1$400$500-$100
Year 2$600$800-$200
Fiscal Data Explains the National Debt (1)

Funding Programs & Services

The federal government needs to borrow money to pay its bills when its ongoing spending activities and investments cannot be funded by federal revenues alone. Decreases in federal revenue are largely due to either a decrease in tax rates or individuals or corporations making less money. The national debt enables the federal government to pay for important programs and services even if it does not have funds immediately available, often due to a decrease in revenue. Decreases in federal revenue coupled with increased government spending further increases the deficit.

Consistent with the purpose of the federal government established by the U.S. Constitution, money is spent on programs and services to ensure the well-being of U.S. residents. The Constitution’s preamble states that the purpose of the federal government is “…to establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity.” Uninterrupted funding of programs and services is critical to residents’ health, welfare, and security.

What are some of the major spending categories?

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In accordance with the 2014 DATA Act, federal agencies are required to submit financial data on a quarterly and/or monthly basis to Anyone can visit USAspending for a breakdown of what the federal government spends each year and how it spends that money. Visitors can follow the money from the Congressional appropriations to the federal agencies and down to local communities and businesses.

The Growing National Debt

The U.S. has carried debt since its inception. Debts incurred during the American Revolutionary War amounted to over $75 million by January 1, 1791. Over the next 45 years, the debt continued to grow until 1835 when it notably shrank due to the sale of federally-owned lands and cuts to the federal budget. Shortly thereafter, an economic depression caused the debt to again grow into the millions. The debt grew over 4,000% through the course of the American Civil War, increasing from $65 million in 1860 to $1 billion in 1863 and almost $3 billion shortly after the conclusion of the war in 1865. The debt grew steadily into the 20th century and was roughly $22 billion after the country financed its involvement in World War I.

Notable recent events triggering large spikes in the debt include the Afghanistan and Iraq Wars, the 2008 Great Recession, and the COVID-19 pandemic. From FY 2019 to FY 2021, spending increased by about 50%, largely due to the COVID-19 pandemic. Tax cuts, stimulus programs, increased government spending, and decreased tax revenue caused by widespread unemployment generally account for sharp rises in the national debt.

Comparing a country’s debt to its gross domestic product (GDP) reveals the country’s ability to pay down its debt. This ratio is considered a better indicator of a country’s fiscal situation than just the national debt number because it shows the burden of debt relative to the country’s total economic output and therefore its ability to repay it. The U.S. debt to GDP ratio surpassed 100% in 2013 when both debt and GDP were approximately 16.7 trillion.

Visualizing the debt - How much is $99999999999999.99 trillion dollars?

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Breaking Down the Debt

The national debt is composed of distinct types of debt, similar to an individual whose debt consists of a mortgage, car loan, and credit cards. The national debt can be broken down by whether it is non-marketable or marketable and whether it is debt held by the public or debt held by the government itself (known as intragovernmental). The national debt does not include debts carried by state and local governments, such as debt used to pay state-funded programs; nor does it include debts carried by individuals, such as personal credit card debt or mortgages.

The visual below comparing calendar year and displays the difference in growth between debt held by the public and intragovernmental debt. While both types of debt combine to make up the national debt, they have increased by different amounts in the past several years. One of the main causes of the jump in public debt can be attributed to increased funding of programs and services during the COVID-19 pandemic. Intragovernmental debt has not increased by quite as much since it is primarily composed of debt owed on agencies’ excess revenue invested with the Treasury. The revenue of the largest investor in Treasury securities, the Social Security Administration, has not increased significantly in recent years, resulting in this slower intragovernmental holding increase.


Maintaining the National Debt

The federal government is charged interest for the use of lenders’ money, in the same way that lenders charge an individual interest for a car loan or mortgage. How much the government pays in interest depends on the total national debt and the various securities’ interest rates.

As of it costs $0 billion to maintain the debt, which is 0% of the total federal spending in fiscal year .

The national debt has increased every year over the past ten years. Interest expenses during this period have remained fairly stable due to low interest rates and investors’ judgement that the U.S. Government has a very low risk of default. However, recent increases in interest rates and inflation are now resulting in an increase in interest expense.

When interest rates remain low over time, interest expense on the debt paid by the federal government will remain stable, even as the federal debt increases. As interest rates increase, the cost of maintaining the national debt also increases.

Why can't the government just print more money?

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The Debt Ceiling

The debt ceiling, or debt limit, is a restriction imposed by Congress on the amount of outstanding national debt that the federal government can have. The debt ceiling is the amount that the Treasury can borrow to pay the bills that have become due and pay for future investments. Once the debt ceiling is reached, the federal government cannot increase the amount of outstanding debt, losing the ability to pay bills and fund programs and services. However, the Treasury can use extraordinary measures authorized by Congress to temporarily suspend certain intragovernmental debt allowing it to borrow to fund programs or services for a limited amount of time after it has reached the ceiling.

Since the United States has never defaulted on its obligations, the scope of the negative repercussions related to a default are unknown but would likely have catastrophic repercussions in the United States and in markets across the globe.

How is the debt ceiling different from a government shutdown?

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Tracking the Debt

Created in 2012 and operating under the Department of the Treasury, the Bureau of the Fiscal Service manages all federal payments and collections and provides government-wide accounting and reporting services. A primary function of the Fiscal Service is to account for and report the national debt, as dictated by the U.S. Constitution, which states that “regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.”

Dive Deeper into the Debt

For more information about the national debt, please explore more of Fiscal Data and check out the extensive resources listed below.

The most recent U.S. Government Financial Report

America’s Fiscal Future: Federal Debt

Federal Net Interest Costs: A Primer

Is the Federal Reserve Printing Money in Order to Buy Treasury Securities?

Options for Reducing Deficit

Treasury Bulletin

Fiscal Data Explains the National Debt (2)

“Rather go to bed without dinner than to rise in debt.”

Benjamin Franklin, statesman, civic leader, and diplomat

“The necessity for borrowing in particular emergencies cannot be doubted, so on the other, it is equally evident that, to be able to borrow upon good terms, it is essential that the credit of the nation should be well established.”

Alexander Hamilton, 1st U.S. Treasury Secretary

Fiscal Data Explains the National Debt (3)

Data Sources & Methodologies

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Fiscal Data Explains the National Debt (2024)


How does fiscal policy relate to national debt? ›

Tax cuts, stimulus programs, increased government spending, and decreased tax revenue caused by widespread unemployment generally account for sharp rises in the national debt. Comparing a country's debt to its gross domestic product (GDP) reveals the country's ability to pay down its debt.

What is the US fiscal debt? ›

The $34 trillion gross federal debt equals debt held by the public plus debt held by federal trust funds and other government accounts. In very basic terms, this can be thought of as debt that the government owes to others plus debt that it owes to itself. Learn more about different ways to measure our national debt.

What is the national debt quizlet? ›

national debt. is the total amount of money our government has borrowed (through selling bonds) over time.

What measure of national debt is most important? ›

Many economists regard debt held by the public as the most meaningful measure of debt because it focuses on cash raised in financial markets to support government activities. It is often expressed as a percentage of gross domestic product (GDP), a ratio that measures the economy's capacity to support such borrowing.

How can fiscal policy reduce national debt? ›

Maintaining interest rates at low levels can help stimulate the economy, generate tax revenue, and, ultimately, reduce the national debt. Lower interest rates make it easier for individuals and businesses to borrow money for goods and services, which creates jobs and increases tax revenues.

What is the link between fiscal deficit and national debt? ›

What is the difference between the deficit and government debt? The deficit is the difference between government revenue and spending, usually measured over a single financial year. Debt is the total amount owed by the Government which has accumulated over the years. Debt is therefore a much larger sum of money.

Who holds the most US debt? ›

  1. Japan. Japan held $1.15 trillion in Treasury securities as of January 2024, beating out China as the largest foreign holder of U.S. debt. ...
  2. China. China gets a lot of attention for holding a big chunk of the U.S. government's debt. ...
  3. The United Kingdom. ...
  4. Luxembourg. ...
  5. Canada.

Who holds all the US debt? ›

There are two kinds of national debt: intragovernmental and public. Intragovernmental is debt held by the Federal Reserve and Social Security and other government agencies. Public debt is held by the public: individual investors, institutions, foreign governments.

Who controls fiscal policy? ›

In the United States, fiscal policy is directed by both the executive and legislative branches of the government. In the executive branch, the President—with counsel from the Secretary of the Treasury and economic advisors—directs fiscal policies.

What is the national debt backed by? ›

The national debt is the sum of a nation's annual budget deficits, offset by any surpluses. A deficit occurs when the government spends more than it raises in revenue. The government borrows money by selling debt obligations to investors to finance its budget deficit.

What are two factors that can increase the national debt? ›

The size of a budget deficit in any given year is determined by two factors: the amount of money the government spends that year and the amount of revenues the government collects in taxes. Both of these factors are affected by the state of the economy, as well as by the tax and spending policies enacted by Congress.

Where does the US national debt come from? ›

When the federal government spends more than its budget, it creates a deficit. In the fiscal year of 2023, it spent about $381 billion more than it collected in revenues. To pay that deficit, the government borrows money. That can happen by selling marketable securities like treasury bonds.

Can the US ever get out of debt? ›

Under current policy, the United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt whether explicitly or implicitly (i.e., debt monetization producing significant inflation).

What happens if US debt gets too high? ›

A nation saddled with debt will have less to invest in its own future. Rising debt means fewer economic opportunities for Americans. Rising debt reduces business investment and slows economic growth. It also increases expectations of higher rates of inflation and erosion of confidence in the U.S. dollar.

Why is the US in so much debt? ›

Years of elevated budget deficits, exacerbated by massive federal spending during the COVID-19 pandemic, have taken the debt to historic levels: totaling more than $26 trillion in 2023, U.S. federal government debt is now at its highest percentage of gross domestic product (GDP) since World War II.

Does expansionary fiscal policy increase national debt? ›

Investment is primarily purchases of physical capital, so lower interest rates increase investment and economic growth, while higher interest rates decrease investment and economic growth. Expansionary fiscal policy increases the national deficit (and national debt) and causes crowding out.

How does fiscal policy affect national income? ›

Fiscal policy influences the economy through government spending and taxation, typically to promote strong and sustainable growth and reduce poverty.

How can government debt lead to a fiscal crisis? ›

As we have discussed elsewhere, government debt reduces economic activity by crowding out private capital formation and by requiring future tax increases or spending cuts to accommodate future interest payments.

How does fiscal policy affect the US economy? ›

The government can use contractionary fiscal policy to slow economic activity by decreasing government spending, increasing tax revenue, or a combination of the two. Decreasing government spending tends to slow economic activity as the government purchases fewer goods and services from the private sector.

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