The National Debt Is Now More than $34 Trillion. What Does That Mean? (2024)

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The National Debt Is Now More than $34 Trillion. What Does That Mean? ›

Higher levels of debt through cutting taxes or government spending could put more money in consumers' pockets, prompting them to spend more. This could cause the inflation rates to swell, according to Andolfatto. “Generally, economists think that when households feel wealthier, they're likely to spend more,” he said.

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 biggest contributor to national debt, along with years of elevated budget deficits and colossal federal spending during the pandemic, is spending on national emergencies, like major wars and rising healthcare costs, according to Krosby.

He said debt is an important tool for a country, and its importance is why we should be so concerned. Cochrane points out that during the Great Recession and the COVID-19 shutdown, the United States was able to swoop in fast with billions for bailouts, stimulus checks and aid programs.

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.

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.

In total, other territories hold about $7.4 trillion in U.S. debt. Japan owns the most at $1.1 trillion, followed by China, with $859 billion, and the United Kingdom at $668 billion. In isolation, this $7.4 trillion amount is a lot, said Scott Morris, a senior fellow at the Center for Global Development.

United States. The United States boasts both the world's biggest national debt in terms of dollar amount and its largest economy, which resolves to a debt-to GDP ratio of approximately 128.13%.

1) Switzerland

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.

US Treasurys Owned by China, in USD Billions

$797.7 billion of the total $8,023.7 billion U.S. national debt.

How can the US get out of 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.

One of the main culprits is consistently overspending. 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.

The US is a good credit risk

With $34 trillion in liabilities and $200+ trillion in assets, the US federal government has far more assets than many realize. Rather than measuring debt as a percentage of GDP, which is primarily an income measure, measuring debt against total assets paints a far more solvent picture.

U.S. publicly held debt 2013-2024

In March 2024, the public debt of the United States was around 34.59 trillion U.S. dollars, almost two trillion more than in July when it was around 32.6 trillion U.S. dollars.

According to the Bank of Russia's estimate, external debt of the Russian Federation as of March 31, 2024 totaled $304.0 billion, having decreased by $12.8 billion, or by 4.1%, since the end of 2023.

Under current policies, the debt is expected to climb from around 75 percent of the Gross Domestic Product today to over 120 percent by 2040, and keep growing after that.

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.

History shows the debt-to-GDP ratio tends to rise during recessions and in their aftermath. GDP shrinks during a recession while government tax receipts decline and safety net spending rises. The combination of higher budget deficits with lower GDP inflates the debt-to-GDP ratio.

Interest Rates

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.