The United States has carried a national debt since its founding, when the new government assumed the Revolutionary War debts of the states. The debt was briefly paid off in 1835, rose sharply in the Civil War and the world wars, and has grown in most years since the 1970s. Debt held by the public is now close to the size of the entire economy, a level last reached at the end of World War II.
This guide explains how borrowing works, who owns the debt, why it has grown, what it costs, and the competing views about what to do.
The debt grows when spending outpaces revenue. Major drivers include wars, recessions that reduce taxes and increase aid, tax cuts, and the growth of Social Security, Medicare, and Medicaid as the population ages and health costs rise. The 2008 financial crisis and the COVID-19 pandemic added trillions in a few years. The Congressional Budget Office estimated that the tax and spending law enacted in July 2025 would add more than three trillion dollars to deficits over ten years.
The Congressional Budget Office projects that debt held by the public will exceed its 1946 record as a share of the economy around the end of the decade. Some economists warn that high debt raises interest rates, crowds out private investment, limits room to respond to crises, and could eventually trigger a fiscal crisis. Others argue that a country borrowing in its own currency has more room than critics assume and that investment can pay for itself. Proposals range from spending cuts and entitlement changes to tax increases, budget rules, and a bipartisan fiscal commission, and supporters of each approach disagree sharply about the mix.
As the debt grew and interest rates rose after 2022, net interest became one of the fastest-growing parts of the budget, passing defense and Medicare spending. Interest is mandatory and cannot be cut through appropriations. Credit rating agencies have lowered the U.S. rating from the top grade: Standard and Poor's in 2011, Fitch in 2023, and Moody's in 2025, citing rising debt and political standoffs over the debt ceiling.
The Constitution gives Congress the power to borrow money on the credit of the United States. The Treasury's Bureau of the Fiscal Service sells marketable securities at auction: bills maturing in a year or less, notes of two to ten years, bonds of 20 or 30 years, and inflation-protected securities. It also issues savings bonds. The 14th Amendment says the validity of the public debt shall not be questioned, and Treasury securities are treated worldwide as among the safest assets.
When the government spends more than it collects in a fiscal year, it runs a deficit and borrows the difference. Each year's deficit adds to the debt. The government last ran surpluses from 1998 to 2001. Analysts usually focus on debt held by the public, which is borrowing from outside the government, and measure it against gross domestic product to show how large it is relative to the economy's capacity to pay.
About a fifth of gross debt is held inside the government, mainly by the Social Security and Medicare trust funds and federal retirement funds. Of the debt held by the public, foreign investors and governments own roughly a quarter to a third, with Japan, the United Kingdom, and China among the largest holders. The Federal Reserve holds several trillion dollars acquired through its bond purchases. The rest is held by American banks, mutual funds, pension funds, insurers, state and local governments, and individuals.
See the borrowing limit in the debt ceiling explained, follow spending decisions in how the federal budget works, or see where the money goes in where your tax dollars go.