Putting the National Debt in Focus
I’ll be honest, few issues concern me more than the U.S. national debt. As it continues to balloon—$38 trillion dollars as we record this—we continue to enter new territory that has never been entered before. Just last year, we produced a Fastest 4 segment on the national debt and it was $35 trillion. Think about that. We’ve added $3 trillion to our debt in 12 months.
It is difficult to underestimate the impact an astronomical national debt can have on the economy and on personal wealth.
Government Spending and Deficit Debate
It also doesn’t seem to be high on many lawmakers’ radar. The current government shutdown has largely been a debate over spending. And this year has been a bright spot for reducing the budget deficit. According to First Trust Chief Economist Brian Wesbury, the deficit has been reported at $1.775 trillion for Fiscal Year 2025, which is $41 billion smaller than last year. But, to say we have a long way to go would be a huge understatement.
Debt-to-GDP: The Key Economic Metric
Wesbury, along with many other economists, believe the $38 trillion number is not what we should focus on when analyzing the risk of the national debt. They analyze the debt as a percentage of GDP, which is Gross Domestic Product. If we do that, we have been here before.
The Chair of MIT’s economic department says during World War II, the U.S. debt reached 120% of GDP. The budget deficit reached 25% of GDP. Today, the deficit is roughly 6% of GDP. While that comparison shows we are not as bad as we have been in the past, in both cases, the path is unsustainable.
After World War II, we paid back our debts by running surpluses because the economy grew rapidly. We have to figure out a way to do that again.
Rising Interest Costs Threaten Stability
Interest costs alone on the national debt are a huge problem. The Peter G. Peterson Foundation says the government spent more on net interest costs in 2024 than it did on any federal program other than Social Security.
An exploding debt threatens safety net programs, economic opportunities, and erodes confidence in the U.S. dollar.
The Bigger Financial Picture
No one wants government workers furloughed. No one wants families to not be able to pay their bills, but we all have a bigger problem when the government can’t pay theirs.
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