US National Debt Surges – Is a Fiscal Reckoning Near?

The U.S. national debt has reached a staggering $35.7 trillion as of October 2024, skyrocketing by $500 billion in just the past two weeks! Over the last year, it’s grown by $2 trillion, signalling deeper fiscal issues that need urgent attention. To put it in perspective, the debt stood at $26.9 trillion in 2020—meaning it’s jumped nearly $9 trillion in just four years. Even more striking, it’s doubled from $18.1 trillion in 2015, showing how quickly things are escalating. The $2.2 trillion rise from 2023 to 2024 alone outpaced several previous years combined, highlighting serious concerns about the U.S. economy’s sustainability.

Debt Numbers That’ll Make You Do a Double Take! 

How the US national debt has evolved over the last 10 years, nearly doubling from 2015 to 2024. Let's have a closer looks at it based on Fiscal Data:

The national debt is climbing fast, and it’s more than just a big number—it's a sign of how the country’s spending habits are changing. From social programs and healthcare to infrastructure and rising interest costs, it all adds up. Right now, the debt stands at a record high, hitting over $105,000 for every American. As Bank of America’s CEO Brian Moynihan puts it, "The U.S. needs to balance its books." In other words, we can’t keep swiping the credit card forever. Sure, COVID-19 spending helped us dodge a recession during both Trump and Biden’s terms, but now it’s time to figure out how to pay off the tab and get our finances back on track. 

What’s Really Driving America’s Soaring Debt? 

It’s not just a Trump thing or a Biden thing—it’s both. Under Trump, the debt ballooned by $8.4 trillion, thanks to COVID relief and other spending measures. Biden’s administration has added another $4.3 trillion, largely fueled by the American Rescue Plan. Here’s the kicker: both current and potential future candidates, like Kamala Harris and Trump, seem ready to keep the spending going, setting the stage for even higher debt levels. 

And then there’s the interest bill. The cost of servicing the national debt has hit over $1 trillion this year alone, a whopping 30% increase from last year. Interest payments have now become the third-largest expense in the federal budget, trailing only Social Security and Medicare. As these costs grow, they’re squeezing out funds that could go to other critical programs. The deficit is also swinging wildly. While there was a brief budget surplus of $89 billion in August 2023, the projected deficit for 2024 is set to soar to nearly $2 trillion. This surge, 24% higher than last year, is driven by rising interest payments and relentless spending. 

But what’s really fuelling this debt surge? Several macroeconomic factors are at play. For starters, stagnant tax revenues have not kept pace with expectations, leaving a bigger gap to fill. At the same time, government spending remains high, aimed at supporting economic recovery, curbing inflation, and funding infrastructure and social programs. Add to this the Federal Reserve’s high-interest rates—while they help control inflation, they’ve also made borrowing a lot more expensive for the government. 

In short, America’s debt is caught in a complex web of policy choices, high interest rates, and demographic pressures. The big question: How much longer can the country afford to keep this up before the debt bill becomes unmanageable? 

Forget Borrowing, It’s the Debt-to-GDP Ratio!

Borrowing itself isn’t inherently bad—it keeps the bond market active and supports investments. The real concern lies in the debt-to-GDP ratio, which measures debt against the economy’s capacity to produce. According to the Congressional Budget Office, the debt-to-GDP ratio could hit 166% by 2054, suggesting that the U.S. might be borrowing beyond its limits. 

The average GDP for fiscal year 2024 was $28.65 T, which was less than the U.S. debt of $35.46 T. This resulted in a Debt to GDP Ratio of 124 percent. Generally, a higher Debt to GDP ratio indicates a government will have greater difficulty in repaying its debt. 

What Are Experts Really Saying About America’s Debt Crisis? 

When it comes to the national debt, experts are sounding off—and it’s serious. U.S. Treasury Secretary Janet Yellen isn’t holding back: she warns that not raising the debt ceiling could bring "irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability." In other words, ignoring it is like playing with fire. 

Former Fed Vice Chair Roger W. Ferguson sees the debt ceiling as an "outdated and harmful" tool, saying, "It is time for the United States to leave behind this antiquated mechanism that brings the country to the precipice of default every few years." He believes it’s high time to find a better way of managing fiscal policy. 

Christopher M. Tuttle from the Council on Foreign Relations adds that while some view the debt ceiling as a tool for fiscal discipline, it often "leads to negative fiscal outcomes." He warns that without serious reforms like entitlement adjustments or tax hikes, the U.S. could soon face unsustainable debt levels. 

Experts Weigh In, But What’s Coming Next?

Experts have sounded the alarm, but what’s really needed are concrete steps to steer the economy back on track. With the global landscape already shaky—think rising inflation, geopolitical tensions, and a slow recovery post-pandemic—it's clear that decisive action is crucial. So, what’s the way forward to boost the U.S. economy and manage this growing debt? Possible steps include the following:

• Revamp the Debt Ceiling: Reforming or even removing the debt ceiling mechanism could prevent repeated episodes of economic brinkmanship, allowing for a smoother, more predictable fiscal process. 
• Targeted Spending Cuts: A thoughtful approach to spending cuts, especially in areas that do not compromise economic growth or social safety nets, could help control deficits without harming essential programs. 
• Tax Reforms: Implementing strategic tax reforms that broaden the base while ensuring higher revenue collection could contribute to a more balanced budget. This includes closing loopholes and reconsidering tax cuts that primarily benefit the wealthy. 
• Interest Rate Management: With the Federal Reserve's aggressive rate hikes impacting borrowing costs, finding a balance that controls inflation without stifling growth will be key. Effective communication of monetary policy can also maintain market stability. 
• Boosting Revenue Through Growth: Policies that stimulate economic growth—like investment in green energy, infrastructure upgrades, and tech innovation—could boost revenues without hiking taxes excessively. 
• Global Cooperation: Given the current global challenges, such as inflationary pressures, geopolitical conflicts, and supply chain disruptions, strong international alliances are needed to create a stable economic environment that supports domestic fiscal health. 

What Lies Ahead for the U.S. Economy?

The global economy is on shaky ground, with inflation, volatile energy prices, and geopolitical unrest shaping an uncertain future. However, with the right strategic reforms and proactive steps, the U.S. can chart a sustainable course—one that promotes growth while maintaining fiscal responsibility.

The national debt crisis isn’t just a set of staggering figures; it impacts everything from interest rates to inflation and the long-term health of the economy. Tackling the debt won’t be easy, but it’s crucial for ensuring a stable fiscal future. As the debt continues to climb, the pressing question is: Can Washington find the discipline to confront this challenge head-on?

The stakes are high, and the clock is ticking. Stay ahead of the curve—subscribe to our weekly newsletter to stay informed and prepared for what’s next