June 1, 2025

Overview
The U.S. national debt is approaching $37 trillion In June 2025. A fully Republican controlled federal government has not yet produced a viable plan to reduce spending. Democrats will likely regain control of the House, Senate, or Presidency at some point in the future, which will further increase spending to compensate for Trump Administration cuts. All of this is fueling widespread skepticism about whether any president can address this escalating fiscal challenge.

Spending and debt levels compared to U.S. gross domestic product (GDP), reflects a structural imbalance between federal spending and revenue. Causes of this imbalance include aging demographics, rising healthcare costs, and increasing interest payments.

Recent public discourse, amplified by social media and economic analyses, highlights both concerns over the sustainability of current fiscal policies and also a desire to continue spending on everything from defense programs to social programs. The U.S. government continues to borrow to cover deficits, prompting debates about potential economic consequences and limited viable policy options.

Facts

• The U.S. national debt stood at $36.9 trillion on June 1, 2025, according to U.S. Debt Clock.org, with more than $26 trillion held by the public and more than $12 trillion in intragovernmental debt.
• In fiscal year 2024, net interest payments on the debt reached $882 billion, surpassing federal spending on national defense or Medicare.
• The Congressional Budget Office (CBO) projects federal debt held by the public to rise from 98% of GDP in 2024 to 156% by 2055 under current law.
• An alternative CBO scenario, assuming the 2017 Tax Cuts and Jobs Act is extended permanently, forecasts debt reaching 220% of GDP by 2055.
• The federal deficit for fiscal year 2025 was $1.1 trillion as of February 2025, an 18% increase from the previous year, despite only a 2% rise in revenue.
• Foreign entities hold approximately 33% of publicly held U.S. debt, with Japan ($1.2 trillion) and China ($1.1 trillion) as the largest creditors as of December 2020.
• Historically, the U.S. has run budget deficits every year since 2001, when the last surplus was recorded, with debt growing fivefold since then.

Perspectives

• Congressional Budget Office (CBO): The CBO emphasizes the long-term unsustainability of current fiscal policies, projecting that persistent deficits will drive debt to unprecedented levels, potentially crowding out investments in infrastructure and education. It advocates for policy changes to stabilize the debt-to-GDP ratio.
• U.S. Treasury Department: The Treasury maintains that the U.S. can manage its debt through borrowing, supported by robust demand for Treasury securities. It highlights the suspension of the debt ceiling until January 2025 as a mechanism to ensure liquidity and meet obligations.
• Peter G. Peterson Foundation: This nonprofit warns that structural factors like an aging population and rising healthcare costs are primary drivers of debt growth. It urges immediate fiscal reforms to prevent future generations from bearing disproportionate economic burdens.
• House Budget Committee (Republican): The Committee argues that excessive spending under recent administrations has exacerbated the debt crisis. It calls for spending cuts and pro-growth policies like tax reform to restore fiscal health without undermining economic stability.
• Center for American Progress: This progressive think tank advocates for increasing tax revenues, particularly from high-income earners, to address the debt while preserving social programs. It argues that spending cuts alone would harm vulnerable populations.
• Federal Reserve: The Fed notes that recent interest rate hikes to combat inflation have increased debt servicing costs. It suggests that moderating inflation could ease pressure on interest payments, but fiscal policy adjustments are critical for long-term stability.

Considerations

• Rising interest payments, projected to reach $13.8 trillion over the next decade, reduce funds available for public investments.
• An aging population increases spending on Social Security and Medicare, straining federal budgets as fewer workers contribute to tax revenues.
• The U.S. dollar’s status as the global reserve currency mitigates immediate default risks, but prolonged debt growth could erode international confidence.
• Short-term debt ceiling resolutions provide temporary relief, but long-term fiscal sustainability requires addressing structural spending and revenue imbalances.
• High debt levels may constrain the government’s ability to respond to future economic downturns, limiting stimulus options during recessions.
• Growing foreign ownership of U.S. debt, while currently stable, could pose risks if major creditors like Japan or China reduce holdings.
• Policy reforms, such as revising tax codes or healthcare spending, could stabilize debt but face political resistance due to partisan divides.

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