The total federal debt of the United States passed a new milestone on October 21, 2025, reaching $38 trillion for the first time, with $30.4 trillion in federal debt held by the public, which is equivalent to about 100 percent of our gross domestic product (GDP). This is the highest level it's been relative to our GDP since 1946.
To support this debt, we now spend $1.1 trillion per year on interest payments. This is more than we spend on national defense each year or on the combination of all our annual nondefense discretionary spending such as education, law enforcement, and scientific research. Nearly one-fourth of those interest payments flow to foreign countries, including China, to build their economies rather than our own.
Nearly one-fourth of interest payments on federal debt flow to foreign countries, including China, to build their economies rather than our own.
With interest rates rising at the same time as the debt levels are at all-time highs, we are heading to a world where future U.S. federal government leaders will not have the fiscal discretion to do much other than pay down this debt and meet mandatory spending requirements for Social Security and Medicare.
But we've been here before, and we got out of it. In 1946, after borrowing heavily to fund our World War II efforts and the efforts of the Allies, the federal debt of the United States reached 106 percent of GDP. Unlike most other nations (PDF) in history that reached this level of indebtedness, the United States managed to reduce its debt burden without default. From 1946 to 1974, the United States reduced its debt burden from 106 percent down to 23 percent of GDP.
We accomplished this through a combination of fiscal restraint and through fast economic growth. No one single decision has caused the debt to pile back on over the last 50 years. Had our health care costs grown at the rate of inflation, we would not be here. Had our corporate income tax revenue or our excise tax revenue kept pace with the increased costs, we would not be here. Had our economy grown a little faster, we would not be here.
Instead, 50 years of living just a little bit beyond our means got us here. In new research published by RAND, we examined what it would take to once again reduce the federal debt burden to the post-WWII low of 23 percent of GDP by 2055, which could save the government more than $20 trillion in inflation-adjusted cumulative interest payments over the next three decades. One way would be for the economy to grow 3.2 percent above inflation per year every year for 30 years. Unfortunately, this is likely unattainable; it would be double the Congressional Budget Office's growth projection for the next 30 years. Doubling would be beyond anything but the most optimistic economic growth forecasts of what artificial intelligence could generate.
A more robust approach to get our debt back down to 23 percent of GDP will be a combination of lower and more efficient spending, higher revenues, and faster growth.
Therefore, a more robust approach to get our debt back down to 23 percent of GDP will be a combination of lower and more efficient spending, higher revenues, and faster growth. The specific trade-offs require policymakers to make tough choices. They will need to think beyond the ten-year planning window Congress currently uses to estimate the fiscal impacts of legislation. It will also require policymakers to build durable plans so that we can stay on track over the long term. Imagine a 30-year plan where policymakers came to a consensus on a general path to get to a fiscally sustainable place and a healthy economy.
If we stay on the current path, more of our tax dollars will go to foreign countries than towards keeping Americans safe, responding to disasters, and delivering on all other national priorities. We tackled our debt burden in the past, and we can do it again.
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