- U.S. national debt has surged to a record $37 trillion, now exceeding 120% of GDP.
- Rising interest rates have pushed annual debt payments to $1.1 trillion, outpacing Medicare and defense spending.
- CBO warns deficits could grow by $2.8 trillion over the next decade under current policies.
The U.S. national debt has reached an unprecedented $37 trillion, setting off alarm bells among economists and policymakers. Years of aggressive government spending and multiple stimulus programs have driven debt levels to new heights.
Gennadiy Goldberg, head of U.S. rates strategy at TD Securities, says the real problem is uncertainty. “No one knows at what point the debt becomes unsustainable,” he explained. While Treasury Secretary Scott Bessent admits that the U.S. has a spending problem, Goldberg points out that tax revenues remain low compared to the size of the economy and government expenditures.
Goldberg warns that difficult decisions lie ahead. The government will need to either raise taxes, cut spending, or implement a combination of both. However, determining the best course of action remains extremely complex.
The White House, defending the recent GOP tax bill, claims it includes $1.7 trillion in mandatory savings and will stimulate economic growth. Democrats argue that the tax cuts overwhelmingly benefit the wealthy and will add significantly to the national debt. U.S. Representative Brendan Boyle emphasized, “No single piece of legislation has done more to increase the national debt.”
U.S. Debt Hits 120% of GDP as Interest Costs Soar
Goldman Sachs economists noted that while the House Republicans’ spending bill could slightly reduce the deficit when excluding interest payments, the overall debt trajectory remains concerning due to rising borrowing costs. They highlight that higher real interest rates are pushing debt and interest payments to levels not seen in previous economic cycles.
Currently, the U.S. debt stands at over 120% of GDP. The Treasury is forced to borrow additional funds just to service the growing interest payments. Alarmingly, the U.S. now spends more on interest payments than on both Medicare and defense.
The Congressional Budget Office (CBO) projects that the GOP spending bill passed by the House could increase deficits by $2.8 trillion over the next decade. The White House disputes this estimate, arguing it unfairly includes costs tied to extending Trump’s 2017 tax cuts, which are scheduled to expire without legislative action.
According to Federal Reserve Bank of St. Louis data, interest payments on the national debt reached $1.1 trillion in 2024, nearly double what was paid just five years earlier. Data from the Stockholm International Peace Research Institute confirms that defense spending now trails interest payments.
U.S. Interest Payments May Hit $1.8T
A separate CBO analysis shows that the new White House tax proposal could add $2.4 trillion to the deficit by 2035, leading to an additional $550 billion in interest payments over the next decade. By 2035, annual interest expenses could soar to $1.8 trillion.
Chris Edwards of the Cato Institute warns that rising interest costs may eventually crowd out other federal priorities. In 2023, interest payments accounted for 3% of GDP. The Peter G. Peterson Foundation projects this could climb to 4.15% by 2035 if current policies remain unchanged.
Even industry leaders are raising concerns. Tesla CEO Elon Musk stated that Congress is “spending America into bankruptcy,” citing how interest payments have surged from $416 billion in 2014 to more than $1 trillion in 2024.
Moody’s Ratings has also sounded the alarm, warning that persistent deficits will continue to increase both the debt load and the cost of servicing it. As debt levels climb, the risks to America’s long-term financial stability continue to grow.
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