The United States national debt surpassed $35 trillion for the first time last week. According to the US Treasury Department, the national debt on Friday, July 26th, 2024, reached $35,001,278,179,208.67. Despite this staggering figure, it appears that both the government and many economists are treating it as a manageable issue, assuming it can indefinitely increase without severe repercussions. Historically, warnings of economic collapse and a weakened US dollar due to high national debt have not materialized, leading to a sense of complacency.
The real concern lies in the interest paid on this debt. Currently, the US faces historically high-interest rates, coupled with a national debt that has grown over 600% since the year 2000. To put this in perspective, it took the US government 224 years to accumulate a national debt of $5.75 trillion by 2000. In the subsequent 24 years, that figure has ballooned nearly an additional $30 trillion. This rapid increase places immense pressure on the federal budget, with a significant portion now allocated to servicing the debt.
The compounding effect of high-interest rates on such a vast debt load threatens to limit the government’s fiscal flexibility. As more resources are diverted to interest payments, less is available for essential services and investments. This growing financial strain underscores the need for urgent and sustainable fiscal policies to address the burgeoning debt and its long-term implications on the nation’s economic health.
In the following analysis covering the calendar periods from 2011 through June 2024, the national debt has surged by 137.6%, and interest payments have skyrocketed by 155.2%. In contrast, GDP has grown by only 33.1%.
National Debt and Interest Expense compared to Real GDP by Year
| Year | Average Debt | % Increase in Debt since 2011 | Interest Expense | % Increase in Interest since 2011 | Real GDP Annualized (2017 Dollars) | % Increase in GDP since 2011 |
|---|---|---|---|---|---|---|
| 2011 | 14,498,790,402,728 | 0.0% | 454,287,241,700.15 | 0.0% | 17,222,583,000,000 | 0.0% |
| 2012 | 15,827,569,532,424 | 9.2% | 345,391,369,404.34 | -24.0% | 17,489,852,000,000 | 1.6% |
| 2013 | 16,793,787,452,582 | 15.8% | 409,014,706,844.71 | -10.0% | 18,016,147,000,000 | 4.6% |
| 2014 | 17,634,086,123,035 | 21.6% | 422,347,320,133.01 | -7.0% | 18,500,031,000,000 | 7.4% |
| 2015 | 18,239,743,900,085 | 25.8% | 410,392,837,694.61 | -9.7% | 18,892,206,000,000 | 9.7% |
| 2016 | 19,383,243,639,455 | 33.7% | 445,228,899,107.28 | -2.0% | 19,304,352,000,000 | 12.1% |
| 2017 | 20,037,734,618,397 | 38.2% | 466,401,387,635.20 | 2.7% | 19,882,352,000,000 | 15.4% |
| 2018 | 21,231,519,958,768 | 46.4% | 540,253,439,996.36 | 18.9% | 20,304,874,000,000 | 17.9% |
| 2019 | 22,336,238,608,240 | 54.1% | 570,669,077,380.36 | 25.6% | 20,951,088,000,000 | 21.6% |
| 2020 | 25,631,690,493,791 | 76.8% | 494,909,021,812.02 | 8.9% | 20,724,128,000,000 | 20.3% |
| 2021 | 28,363,346,557,839 | 95.6% | 584,015,613,263.86 | 28.6% | 21,847,602,000,000 | 26.9% |
| 2022 | 30,613,312,054,854 | 111.1% | 774,679,343,619.21 | 70.5% | 21,989,981,000,000 | 27.7% |
| 2023 | 32,392,893,469,158 | 123.4% | 960,603,664,944.34 | 111.5% | 22,679,255,000,000 | 31.7% |
| 2024 | 34,454,463,974,980 | 137.6% | 1,159,469,847,589.54 | 155.2%* | 22,918,739,000,000 | 33.1% |
Source: US Department of Treasury and FRED.
*The % Increase in National Debt for 2024 is estimated as double the interest expense as the first half of 2024
The concern is that interest payments on the national debt will escalate to the point where the interest itself must be financed by additional debt, creating an uncontrollable cycle of increasing interest payments. Projections estimate that by the end of 2024, interest payments on the debt will approach $1.2 trillion annually. In 2023, the federal budget reported revenues of $4.44 trillion and expenditures of $6.13 trillion, meaning approximately 27% of total revenue is allocated solely to servicing the debt’s interest.
Although the Federal Reserve may lower interest rates slightly in the near future, the ongoing renewal of U.S. Treasuries at high interest rates will continue to drive up interest expenses for several years. This scenario assumes continued economic growth; however, if a recession occurs, tax revenues will likely decline, and government spending may increase further, exacerbating the debt and interest expense issue.
Further in-depth analyses are needed to project when interest expenses might surpass total revenue, highlighting the urgency of addressing this growing financial challenge.