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.
The $34 trillion gross federal debt includes debt held by the public as well as 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.
Tax cuts, stimulus programs, increased government spending, and decreased tax revenue caused by widespread unemployment generally account for sharp rises in the national debt.
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.
The PWBM's three policy bundles to stabilize debt and grow the economy are along three themes: (1) raising taxes on high-income households, (2) broad-based changes to Social Security and Medicare, and (3) a mixture of broad-based new tax revenue and discretionary spending cuts.
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).
At the top is Japan, whose national debt has remained above 100% of its GDP for two decades, reaching 255% in 2023.
Will the US force repayment? Every country should pay its sovereign debt.
Switzerland is a country that, in practically all economic and social metrics, is an example to follow. With a population of almost 9 million people, Switzerland has no natural resources of its own, no access to the sea, and virtually no public debt.
First, the debt held by the public stands at more than $24.64 trillion. This represents debt securities, like Treasury bonds and notes, bought by banks, insurance companies, state and local governments, foreign governments and private investors.
It's 22% higher than the U.S. gross national product as of June 30 (about $27 trillion). It's six times the U.S. debt figure in 2000 ($5.6 trillion). Paid back interest-free at the rate of $1 million an hour, $33 trillion would take more than 3,750 years.
By January of 1835, for the first and only time, all of the government's interest-bearing debt was paid off. Congress distributed the surplus to the states (many of which were heavily in debt). The Jackson administration ended with the country almost completely out of debt!
The average American in 2023 carried $21,800 in personal debt (excluding mortgages), a whopping $8,000 less than what Northwestern Mutual recorded in 2019.
Jerome Kerviel, The Most Indebted Person In The World, Owes $6.3 Billion To Former Employer, Societe Generale. In a hyper-competitive world where everyone strives to be the biggest, boldest and most famous, no one covets Jerome Kerviel record-breaking achievement. He is the most indebted person in the world.
Public debt in Russia averaged 15.4% of GDP in the decade to 2022, below the average of 32.5% of GDP for Eastern Europe. Public debt in Russia was 18.9% of GDP in 2022. For more public debt information, visit our dedicated page.
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.
Consequences of Owing Debt to the Chinese
If China called in all of its U.S. holdings, the U.S. dollar would depreciate, whereas the yuan would appreciate, making Chinese goods more expensive.
It's going to put it into bonds of other countries. It will have to buy other currencies in order to invest in those countries' bonds. So US interest rates will no doubt rise as the supply of US Treasury bonds suddenly increases and the dollar will fall as China moves a lot of money out of dollars.
US Treasurys Owned by China, in USD Billions
As of Oct. 2022, China owns $769.6 billion of the total $7,565 billion U.S. national debt.
Essentially, the Japanese government's strategy is to borrow at an extremely cheap rate and invest in risky, high-return assets—a factor that partially explains why Japan can sustain a high level of debt despite running a consistent deficit.
The financial position of the United States includes assets of at least $269 trillion (1576% of GDP) and debts of $145.8 trillion (852% of GDP) to produce a net worth of at least $123.8 trillion (723% of GDP).