How US national debt grew to its $31.4 trillion high (2024)

A ticking clock in Washington to avert default by raising the nation's borrowing limit is drawing attention to the $31.4 trillion debt already accrued by the United States government.

The country hit its current debt ceiling in mid-January and is expected to run out of cash to be able to pay all its bills as soon as June 1, Treasury Secretary Janet Yellen has warned Congress, while cautioning that the exact "X-date" for default remains fluid.

MORE: Biden says he's 'confident' US will avert default
How US national debt grew to its $31.4 trillion high (1)

As President Joe Biden and leading lawmakers including House Speaker Kevin McCarthy work to hammer out a deal, here's what to know about how the U.S. amassed its debts so far.

What is the national debt?

Nearly every year, the government spends more than it collects in taxes and other revenue, resulting in a deficit. (The debt ceiling, set by Congress, caps how much the U.S. can borrow to pay for its remaining bills.) The national debt, now at a historic high, is the buildup of its deficits over time.

Only five times in the past half century has the U.S. run a surplus, the most recent being in 2001

"Each side of the political aisle can blame the other, but the debt is mathematically just a mismatch," Kent Smetters, a professor at the University of Pennsylvania's Wharton School of business who formerly worked at the nonpartisan Congressional Budget Office, told ABC News.

The U.S. has had debt since its founding and has only been completely debt-free once, in 1835.

How did it grow to $31.4 trillion?

The national debt has grown significantly since the early 1980s under both Republican and Democratic administrations.

The largest percentage increases to the debt occurred under Presidents Ronald Reagan and George W. Bush, both of whom enacted tax cuts that led to large deficits.

How US national debt grew to its $31.4 trillion high (2)

Flashpoints that greatly contributed to the debt over the past 50 years include the wars in Iraq and Afghanistan, the 2008 financial crisis and the 2020 COVID-19 pandemic -- the latter two prompting sweeping stimulus measures from Congress that cost trillions of dollars.

"Some of the debt is definitely policy-driven, such as in the case of tax cuts. Some of it's reactive: We had a pandemic, we had a financial crisis, and the government's going to take a position and step in," said David Thomson, the director of Sacred Heart University's history program, who has written about the U.S. debt.

"When you add all those things up, it leads to some pretty significant chunks of change. And that's gotten us up to that $31.4 trillion mark," Thomson said.

Who owns the debt?

Much of the debt -- $24.6 trillion -- is held by the public in the form of financial securities issued by the Treasury Department. Another $6.8 trillion is held by various parts of the U.S. government.

The public debt is held by individuals, corporations, foreign nations and entities, state or local governments and Federal Reserve Banks.

The amount of publicly-held debt has doubled over the past decade, Smetters said, and is considered by many economists to be the most important measure of debt.

MORE: US debt limit: How a default could affect you

Will the debt keep growing?

One model from Wharton estimates that if the government wanted to balance its budget sheets, it would have to either permanently and immediately reduce spending or increase tax revenue.

All spending, including for popular programs like Social Security, Medicare and Medicaid, would need to be slashed by 30%, according to the Wharton model. Or the federal government could permanently increase all sources of federal tax revenue by roughly 40%.

How US national debt grew to its $31.4 trillion high (3)

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"Or some combination of the two," Smetters said. "Right now, the discussions happening in Washington on both sides are so far away from the actual math of what needs to happen. They're still dancing around some much bigger issues."

However, many economists believe some government debt is a good thing. Thomson noted that growing public debt speaks to the fact that many view U.S. bonds and and other securities as among the safest assets in the world.

How US national debt grew to its $31.4 trillion high (2024)

FAQs

How did the U.S. debt get so high? ›

It began rising at a fast rate in the 1980's and was accelerated through events like the Iraq Wars and the 2008 Great Recession. Most recently, the debt made another big jump thanks to the pandemic with the federal government spending significantly more than it took in to keep the country running.

Why is the national debt skyrocketing? ›

The mismatch between revenues and spending will continue to grow. The COVID-19 pandemic and legislative response to mitigate its impact led to a significant amount of federal borrowing; however, the primary driver behind the nation's rising debt is the structural mismatch between federal receipts and outlays.

Is the U.S. debt growing faster than its GDP? ›

In fact, debt is projected to grow twice as fast as our economy over the next 30 years. Already, it is nearly the size of our economy. At the end of FY 2023, debt held by the public was about 97% of gross domestic product (GDP).

When did U.S. debt hit 10 trillion? ›

Between 1980 and 1990, the debt more than tripled. The debt shrank briefly after the end of the Cold War, but by the end of FY 2008, the gross national debt had reached $10.3 trillion, about 10 times its 1980 level.

Who owns most of the US debt? ›

Nearly half of all US foreign-owned debt comes from five countries. All values are adjusted to 2023 dollars. As of January 2023, the five countries owning the most US debt are Japan ($1.1 trillion), China ($859 billion), the United Kingdom ($668 billion), Belgium ($331 billion), and Luxembourg ($318 billion).

Who does America owe the most debt to? ›

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.

Who is buying US debt now? ›

The major international owners of US debt include Japan ($1.1T), China, UK, Belgium, Switzerland, Cayman Islands and smaller amounts from the rest of the world.

Who owes the U.S. money? ›

Among other countries, Japan and China have continued to be the top owners of US debt during the last two decades. Since the dollar is a strong currency that is accepted globally, holding a substantial amount of US debt can be beneficial.

How can the U.S. get out of debt? ›

Tax hikes alone are rarely enough to stimulate the economy and pay down debt. Governments often issue debt in the form of bonds to raise money. Spending cuts and tax hikes combined have helped lower the deficit. Bailouts and debt defaults have disadvantages but can help a government solve a debt problem.

Why is Japan's debt not a problem? ›

Around 70% of Japanese government bonds are purchased by the Bank of Japan, and much of the remainder is purchased by Japanese banks and trust funds, which largely insulates the prices and yields of such bonds from the effects of the global bond market and reduces their sensitivity to credit rating changes.

How much debt can the US handle? ›

We estimate that the U.S. debt held by the public cannot exceed about 200 percent of GDP even under today's generally favorable market conditions.

How much is China in debt? ›

In 2023, aggregate local government debt had risen to 92 trillion yuan ($12.58 trillion) and the central government of People's Republic of China ordered its banks to roll over debts in a debt-restructuring. China's gross external debt in 2023 was $2.38 trillion.

What major event caused the debt that the US had? ›

Debt in the new millennium exploded with the September 11, 2001 terrorist attacks. Spending on homeland security and the Iraq War increased and the economy stalled. Also, a large portion of the federal debt stemmed from money borrowed by the government from Social Security and Medicare.

Why is US debt not a problem? ›

The government can easily service its debt because of its unlimited taxing authority and ability to issue more US Treasury securities to repay maturing securities.

Who does the US government borrow money from? ›

The federal government borrows money from the public by issuing securities—bills, notes, and bonds—through the Treasury. Treasury securities are attractive to investors because they are: Backed by the full faith and credit of the United States government. Offered in a wide range of maturities.

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