The $34 Trillion National Debt
The United States is currently running peacetime deficits exceeding 6% of GDP. We examine the math behind the structural deficit and the rising cost of interest on the debt.
The Cost of Servicing the Debt
For over a decade following the Global Financial Crisis, the US government borrowed at historically low interest rates. As the Federal Reserve aggressively hiked the federal funds rate in 2022 and 2023 to combat inflation, the cost of servicing existing and new debt skyrocketed.
Net interest expense is now on pace to exceed both national defense and Medicare spending in the federal budget.
| Fiscal Year | Total Public Debt | Net Interest Expense | % of Federal Outlays |
|---|---|---|---|
| 2020 | $26.9T | $345B | 5.3% |
| 2021 | $28.4T | $352B | 5.2% |
| 2022 | $30.9T | $475B | 7.6% |
| 2023 | $33.1T | $659B | 10.7% |
| 2024 (Est) | $34.5T+ | $870B+ | ~13.0% |
Drivers of the Structural Deficit
The current deficit is considered "structural" because it is baked into existing law regarding mandatory spending (Social Security, Medicare) and tax revenues, independent of the business cycle.
Mandatory vs Discretionary
A common mistake in political discourse is assuming the budget can be balanced solely by cutting discretionary spending (such as foreign aid or specific federal agencies). In reality, mandatory spending and interest account for over 70% of all federal outlays.
Frequently Asked Questions
Who owns the national debt?
Roughly 78% is held by the public (including domestic investors, the Federal Reserve, and foreign governments like Japan and China). The remaining 22% consists of intragovernmental holdings (e.g., the Social Security trust fund holding Treasury securities).