National Debt

National debt (also called sovereign debt or public debt) is the cumulative total of a government's borrowing, accumulated when annual spending exceeds revenue (budget deficits). The U.S. national debt surpassed $34 trillion in early 2024, representing over 120% of GDP. It is composed of two parts: debt held by the public (Treasury securities owned by individuals, institutions, and foreign governments — about $27 trillion) and intragovernmental holdings (money owed to federal trust funds like Social Security — about $7 trillion). The government finances its debt by issuing Treasury bills, notes, bonds, and TIPS, which are considered the safest investments globally because they are backed by the U.S. government's taxing power. Interest payments on the debt exceeded $1 trillion annually by 2024, becoming one of the largest budget items. The debt-to-GDP ratio is the key metric for assessing sustainability — economists debate the threshold at which debt becomes problematic. Rising debt can lead to higher interest rates, crowding out private investment, and currency depreciation.