Top 10 Reasons Why the National Debt Matters (2024)

Feb 12, 2024

At $34 trillion and rising, the national debt threatens America’s economic future. Here are the top ten reasons why the national debt matters.

  1. Trillion dollar deficits are now the norm. Top 10 Reasons Why the National Debt Matters (1)

    The Congressional Budget Office (CBO) projects that the U.S. government will run trillion-dollar deficits over the next 10 years, resulting in a cumulative deficit of $20.0 trillion between 2025 and 2034.

  2. Interest costs are growing rapidly. Top 10 Reasons Why the National Debt Matters (2)

    Interest costs were $659 billion in 2023 and are projected to rise to $1.6 trillion by 2034. In 2023 alone, the United States spent more on net interest costs than it did on Medicaid and Income Security Programs.

  3. Key investments in our future are at a risk. Top 10 Reasons Why the National Debt Matters (3)

    Higher interest costs could crowd out important public investments that can fuel economic growth — priority areas like education, R&D, and infrastructure. A nation saddled with debt will have less to invest in its own future.

  4. Rising debt means fewer economic opportunities for Americans. Top 10 Reasons Why the National Debt Matters (4)

    Rising debt reduces business investment and slows economic growth. It also increases expectations of higher rates of inflation and erosion of confidence in the U.S. dollar. The federal government should not allow budget imbalances to harm the economy and families across the country.

  5. Less flexibility to respond to crises. Top 10 Reasons Why the National Debt Matters (5)

    On its current path, the United States is at greater risk of a fiscal crisis, and high amounts of debt could leave policymakers with much less flexibility to deal with unexpected events. If the country faces another major recession like that of 2007–2009, it will be more difficult to recover.

  6. Protecting the essential safety net. Top 10 Reasons Why the National Debt Matters (6)

    The unsustainable fiscal path threatens the safety net and the most vulnerable in American society. If the government does not have sufficient resources, essential programs like Medicaid and Social Security could be put in jeopardy.

  7. A solid fiscal foundation leads to economic growth. Top 10 Reasons Why the National Debt Matters (7)

    A solid fiscal outlook provides a foundation for a growing, thriving economy. Putting the nation on a sustainable fiscal path creates a positive environment for growth, opportunity, and prosperity. With a strong fiscal foundation, the United States will have increased access to capital, more resources for private and public investments, improved consumer and business confidence, and a stronger safety net.

  8. The national debt is a bipartisan priority for Americans. Top 10 Reasons Why the National Debt Matters (8)

    Three out of every four voters agree that the national debt should be a top three priority for lawmakers.

  9. Many solutions exist! Top 10 Reasons Why the National Debt Matters (9)

    The good news is that there are plenty of solutions to choose from. The Peterson Foundation’s Solutions Initiative brought together policy organizations from across the political spectrum to develop long-term fiscal plans. From budget reform to national security spending to overhauling our tax system, there are comprehensive plans that make placing the nation on a strong, sustainable fiscal footing possible.

  10. The sooner we act, the easier the path. Top 10 Reasons Why the National Debt Matters (10)

    It makes sense to get started soon. According to CBO, addressing high and rising debt sooner rather than later means that smaller policy changes would be required to achieve long-term objectives. The benefits of reducing deficits sooner include a smaller accumulated debt and therefore less risk to long-term economic growth and stability. Like any debt problem, the sooner you start to address it, the easier it is to solve.

Addressing the national debt is an essential part of securing America’s economic future. These key fiscal and economic issues should be at the forefront of the policy conversation in Washington, and leaders should seize the opportunity to pursue sensible reforms that will put the U.S. long-term fiscal outlook on a sustainable path.

Expert Views: Fiscal Commission

We asked experts with diverse views from across the political spectrum to share their perspectives.

More

National Debt Clock

See the latest numbers and learn more about the causes of our high and rising debt.

More

Top 10 Reasons Why the National Debt Matters (2024)

FAQs

Top 10 Reasons Why the National Debt Matters? ›

Specifically, the risks to rising federal debt levels are: Slower Economic Growth: During normal economic times, high levels of debt “crowd out” more productive private investment in favor of government bonds. Without strong private investment, economic growth will suffer.

Why does the US national debt matter? ›

Specifically, the risks to rising federal debt levels are: Slower Economic Growth: During normal economic times, high levels of debt “crowd out” more productive private investment in favor of government bonds. Without strong private investment, economic growth will suffer.

What are the 3 major factors causing the national debt to grow? ›

Note. Tax cuts, stimulus programs, increased government spending, and decreased tax revenue caused by widespread unemployment account for sharp rises in the national debt.

What is the biggest driver of the national debt? ›

What are the primary drivers of debt growth? On the spending side of the ledger, the nonpartisan Congressional Budget Office (CBO) projects the main drivers to be mandatory spending programs, namely Social Security—the largest U.S. government program—Medicare, and Medicaid.

Why should we not worry about the national debt? ›

Is debt at that level a problem? For now, it isn't. The U.S. government borrows trillions of dollars a year at very low interest rates on global financial markets, and there doesn't appear to be much private sector borrowing that is crowded out by U.S. Treasury borrowing right now.

Is the national debt actually a problem? ›

As we have discussed elsewhere, government debt reduces economic activity by crowding out private capital formation and by requiring future tax increases or spending cuts to accommodate future interest payments.

Who is national debt owed to? ›

There are two kinds of national debt: intragovernmental and public. Intragovernmental is debt held by the Federal Reserve and Social Security and other government agencies. Public debt is held by the public: individual investors, institutions, foreign governments.

Why does the US owe so much money? ›

One of the main culprits is consistently overspending. When the federal government spends more than its budget, it creates a deficit. In the fiscal year of 2023, it spent about $381 billion more than it collected in revenues. To pay that deficit, the government borrows money.

Why is U.S. debt so high? ›

Tax cuts, stimulus programs, increased government spending, and decreased tax revenue caused by widespread unemployment generally account for sharp rises in the national debt. Comparing a country's debt to its gross domestic product (GDP) reveals the country's ability to pay down its debt.

When was the last time the US did not have a deficit? ›

The terms “national deficit”, “federal deficit” and “U.S. deficit” have the same meaning and are used interchangeably by the U.S. Treasury. A surplus occurs when the government collects more money than it spends. The last surplus for the federal government was in 2001.

Who are the top 4 owners of US debt? ›

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. After the recent weak treasury auction, US government officials warned that they are seeing waning demand from international buyers.

Who owes the US 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.

Which country has no debt? ›

1) Switzerland

Switzerland is a country that, in practically all economic and social metrics, is an example to follow. With a population of almost 9 million people, Switzerland has no natural resources of its own, no access to the sea, and virtually no public debt.

Why is national debt so bad? ›

History shows the debt-to-GDP ratio tends to rise during recessions and in their aftermath. GDP shrinks during a recession while government tax receipts decline and safety net spending rises. The combination of higher budget deficits with lower GDP inflates the debt-to-GDP ratio.

What does the US spend the most money on? ›

Nearly half of mandatory spending in 2022 was for Social Security and other income support programs such as the Child Tax Credit, food and nutrition assistance, and federal employee benefits (figure 3). Most of the remainder paid for the two major government health programs, Medicare and Medicaid.

How can the US 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.

How much money does the US owe in debt and why? ›

The $34 trillion gross federal debt includes debt held by the public as well as debt held by federal trust funds and other government accounts. In very basic terms, this can be thought of as debt that the government owes to others plus debt that it owes to itself.

Which of the following is a benefit of government debt? ›

Debt allows flexibility in offsetting an economic shock. The ability to pay for investments that lead to economic growth. Debt prevents the import - export ratio from exceeding transfer payments. Borrowing tends to increase wages and keep inflation rates stable.

Why will US debt continue to rise? ›

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.

Top Articles
Latest Posts
Recommended Articles
Article information

Author: Msgr. Benton Quitzon

Last Updated:

Views: 5885

Rating: 4.2 / 5 (43 voted)

Reviews: 90% of readers found this page helpful

Author information

Name: Msgr. Benton Quitzon

Birthday: 2001-08-13

Address: 96487 Kris Cliff, Teresiafurt, WI 95201

Phone: +9418513585781

Job: Senior Designer

Hobby: Calligraphy, Rowing, Vacation, Geocaching, Web surfing, Electronics, Electronics

Introduction: My name is Msgr. Benton Quitzon, I am a comfortable, charming, thankful, happy, adventurous, handsome, precious person who loves writing and wants to share my knowledge and understanding with you.