US & World Economies US Economy Fiscal Policy How Did the U.S. National Debt Get So Big? By Kimberly Amadeo Kimberly Amadeo Kimberly Amadeo is an expert on U.S. and world economies and investing, with over 20 years of experience in economic analysis and business strategy. She is the President of the economic website World Money Watch. As a writer for The Balance, Kimberly provides insight on the state of the present-day economy, as well as past events that have had a lasting impact. learn about our editorial policies Updated on October 4, 2022 Reviewed by Robert C. Kelly Reviewed by Robert C. Kelly Robert Kelly is managing director of XTS Energy LLC, and has more than three decades of experience as a business executive. He is a professor of economics and has raised more than $4.5 billion in investment capital. learn about our financial review board Fact checked by Emily Ernsberger Fact checked by Emily Ernsberger Twitter Emily Ernsberger is a fact-checker and award-winning former newspaper reporter with experience covering local government and court cases. She also served as an editor for a weekly print publication. Her stint as a legal assistant at a law firm equipped her to track down legal, policy and financial information. learn about our editorial policies Share Tweet Pin Email In This Article View All In This Article The U.S. National Debt Over Time Why Does the U.S. Have So Much Debt? How the U.S. Debt Affects the Economy Frequently Asked Questions (FAQs) How much debt is the U.S. in? What is the U.S. debt clock? Which country is the most in debt? Photo: The Balance / Julie Bang The U.S. debt is the sum of all outstanding debt owed by the federal government. On Feb. 1, 2022, it surpassed $30 trillion for the first time, and soon after it set another record on Oct. 4, 2022 by passing the $31 trillion mark. The U.S. Treasury Department tracks the current total public debt outstanding and this figure changes daily. The debt clock in New York also tracks it. The majority of the national debt is debt held by the public. The government owes it to buyers of U.S. Treasury notes including individuals, companies, and foreign governments. The remaining portion is intragovernmental debt. The Treasury owes this debt to its various departments that hold Government Account Series securities. The biggest owner is the Social Security Trust Fund. These Government Account Series securities have been running surpluses for years, and the federal government uses these surpluses to pay for other departments. They will come due as people born from 1946 to 1964 retire over the next two decades. Key Takeaways The U.S. debt is the total federal financial obligation owed to the public and intragovernmental departments.The U.S. national debt is so big because Congress continues both deficit spending and tax cuts. If steps are not taken, the ability for the U.S. to pay back its debt will come into question, affecting the global economy. The U.S. National Debt Over Time The chart below tracks U.S. debt milestones from 1989 to 2021. It has increased by more than 800% during that time. In February 2022, the national debt exceeded $30 trillion and in October . This figure includes both debt held by the public as well as intragovernmental debt. Why Does the U.S. Have So Much Debt? There are a few significant reasons as to why the size of the national debt is so big. Federal Budget Deficits The national debt is an accumulation of federal budget deficits. Each new spending program and tax cut adds to the debt. The largest deficit thus far goes to President Barack Obama. He added $8.3 trillion to the debt, a 70% increase. That's due to the American Recovery and Reinvestment Act (ARRA) stimulus package, which helped resolve the 2008 financial crisis. He also cut taxes and increased military spending. Although the national debt under Obama grew the most dollar-wise, it wasn't the biggest percentage increase. That honor goes to President Franklin D. Roosevelt. He only added about $236.1 billion between 1933 and 1945, but that was an increase of about 1,048%. He did this to fight the Great Depression and prepare the U.S. to enter World War II at the start of the 1940s. President Donald Trump is the second-largest contributor to the debt dollar-wise. He added $7.8 trillion to the debt. This was a 39% increase. As of Feb. 1, 2022, President Biden has added $2.26 trillion to the national debt since taking office on Jan. 20, 2021. This outpaces both President Obama and President Trump's spending. Note More than $2 trillion of the debt that Trump added to was from stimulus spending to help families and businesses recover from the COVID-19 pandemic. Trump's fiscal year budgets also added to the debt before the pandemic hit. Social Security Trust Fund Every president borrows from the Social Security Trust Fund. Over the years, the Fund has taken in more revenue than it needed through payroll taxes leveraged on the baby boomer generation. Ideally, this money should have been invested to be available when members of that generation retire. Instead, the Fund was "loaned" to the government to finance increased spending. This interest-free loan helps keep Treasury bond interest rates low, allowing more debt financing. But, it must be repaid by increased taxes as more individuals retire. Investment From Other Countries Foreign countries like China and Japan buy Treasurys to invest their export proceeds that are denominated in U.S. dollars. They are happy to lend to America—their largest customer—so that it will keep buying their exports. Low Interest Rates The U.S. government has benefited from low interest rates. It couldn't keep running budget deficits if interest rates skyrocketed. Why have interest rates remained low? Purchasers of Treasury bills are confident that the U.S. has the economic power to pay them back. During recessions, foreign countries increase their holdings of Treasury bonds as a safe-haven investment. The Debt Ceiling Congress sets a ceiling on the debt but raises it frequently. Since 1960, Congress has modified the U.S. debt limit 78 times, with more sure to come. President Trump signed the Bipartisan Budget Act of 2019 that suspended the public debt limit through July 31, 2021. On August 1, 2021, the debt ceiling became $28.4 trillion—equal to the amount of the national debt. On December 14, 2021, the debt ceiling was raised once again, by $2.5 trillion—the new limit is around $31.4 trillion. This increase constituted the largest dollar amount increase of the national debt. How the Large U.S. Debt Affects the Economy In the short run, the economy and voters benefit from deficit spending because it drives economic growth and stability. The federal government pays for defense equipment, health care, building construction, and contracts with private businesses. New employees are then hired and they spend their salaries on necessities and wants, like gas, groceries, new clothes, and more. This consumer spending boosts the economy. As part of the components of GDP, federal government spending contributes around 7%. Over the long term, debt holders could demand larger interest payments, because the debt-to-GDP ratio increases, and this high ratio of debt to gross domestic product (GDP) tells investors that the country might have problems repaying them. That's a newer—and worrying—occurrence for the U.S. Back in 1988, the national debt was only half of what the U.S. produced that year. Note Weakened demand for U.S. Treasurys could increase interest rates and that would slow the economy. Lower demand for Treasurys also puts downward pressure on the dollar because its value is tied to the value of Treasury securities. As the dollar value declines, foreign holders get paid back in a currency that is worth less than when they invested, which further decreases demand. Many of these foreign holders would become more likely to invest in their own countries. At that point, the U.S. would have to pay higher interest payments. Congress knows a debt crisis isn’t far away. In less than 20 years, the Social Security Trust Fund won't have enough to cover the retirement benefits promised to people born from 1946 to 1964. That could mean higher taxes once the high U.S. debt rules out further loans from other countries. Frequently Asked Questions (FAQs) How much debt is the U.S. in? The U.S. debt is constantly on the rise, but it hit a new milestone of $31 trillion in Oct. 2022. What is the U.S. debt clock? The U.S. national debt clock is a running tally of how much debt the U.S. is racking up. It's not a real-time tally, but rather an estimation based on continually updated data. An actual clock is displayed in New York City, and you can find other versions online. Which country is the most in debt? Japan is the most in-debt developed nation, with a debt-to-GDP ratio of over 260%. The U.S. has a debt-to-GDP ratio of approximately 108%. Updated by Hilarey Gould Hilarey Gould Twitter Hilarey Gould has spent 10+ years in the digital media space, where she's developed a passion for helping people understand economics, saving, investing, credit card perks, mortgage rates, and more. Hilarey is the editorial director for The Balance and has held full-time and freelance roles at a variety of financial media companies including realtor.com, Bankrate, and SmartAsset. She has a master's in journalism from the University of Missouri, and a bachelor's in journalism and professional writing from The College of New Jersey (TCNJ). learn about our editorial policies Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. U.S. Department of Treasury. “Debt to the Penny.” U.S. Treasury Department. "Debt to the Penny." North Atlantic Treaty Organisation. "Defense Expenditures of NATO Countries (2008-2015)." TreasuryDirect. "Historical Debt Outstanding: Annual 1900-1949." Center on Budget and Policy Priorities. "Policy Basics: Understanding the Social Security Trust Funds." Social Security Administration. "Trust Fund FAQs." U.S. Department of the Treasury. "Major Foreign Holders of Treasury Securities." U.S. Department of the Treasury. "Debt Limit." Senate Republican Policy Committee. “H.R. 3877 – The Bipartisan Budget Act of 2019.” Congress.gov. "S.J.Res.33 - A Joint Resolution Joint Resolution Relating to Increasing the Debt Limit." Bureau of Economic Analysis. “National Income and Product Accounts Tables: Table 1.1.6. Real Gross Domestic Product, Chained Dollars." Federal Reserve Bank of St. Louis. "Federal Debt: Total Public Debt as Percent of Gross Domestic Product." GovInfo.gov. "A Budget for a Better America: Promises Kept. Taxpayers First. Fiscal Year 2020 Budget of the U.S. Government," Page 5. Social Security Administration. "Actuarial Status of the Social Security Trust Funds." Department of the Treasury. "Debt to the Penny." Peter G. Peterson Foundation. "What Is the National Debt Today?" Nikkei Asia. "The Money Pushers. The World Is Embracing Japan-Style Economics."