National Debt Definition
The national debt is a government’s sum of all deficits minus the sum of all surpluses from this and previous years. The more a government borrows each year, the more the national debt rises.
Example of a National Debt Calculation
If, hypothetically, a country is running a deficit in year 1 of $250 billion, in year 2 of $300 billion, in year 3 of $200 billion, and in year 4, a surplus of $100 billion, then (assuming no other deficits or surpluses) the country’s total national debt is
$250 + $300 + $200 -$100 = $650 billion
United States National Debt Data
In the United States, at the beginning of the Reagan administration in 1980, the national debt was “only” $930 billion (see table below). It then grew to $2,600 billion by the end of his administration in 1988, an almost three-fold increase. It has continued to increase thereafter at a rapid pace during most years. Currently, in the United States, stimulus spending, the increasing burden of the Social Security program, rising costs of health and medical programs, defense-related spending, and rising interest payments on the national debt are putting a strain on the government’s purse. This year the United States national debt will approach $32 trillion. For an up-to-the-minute account of our national debt, please click here: US National Debt Clock.
For a table with United States National Debt figures for selected years since 1945, see below. This table also includes the debt as a percentage of the size of our economy (as measured by nominal GDP). Before 2022, the percentage fluctuated from a World War II (1945) high of 116% to a post-World War II low of 33% (1980). By the end of 2022, the debt reached a very high 123%.
|Year||Total National Debt (held by the public and the Federal Reserve, and foreign, state and local governments, rounded to the nearest billion dollar – December 31).||Nominal GDP
(rounded to the nearest billion dollar)
|National Debt as a Percentage of Nominal GDP (rounded to the nearest whole number)|
National Debt Source: U.S. Treasury Department.
Nominal GDP Source: Bureau of Economic Analysis.
Interest on the Debt
When a country borrows money from its citizens and from foreign investors, it pays interest each year to them. The interest is similar to a finance charge you pay on a credit card balance if you don’t pay it off at the end of the month. Below is a table with United States federal government total interest expenses in selected years (this figure does not include interest the federal government receives on its own investments). In some years, the total debt increases, while the total interest expense decreases, and vice versa. This is due to interest rate fluctuations. During years when market interest rates are lower, the government can finance its debt at more favorable conditions. Until 2021, interest rates have been relatively low in the United States and other industrialized countries. This has allowed these governments to borrow at low rates and has allowed them to pay less interest than would have been the case at higher rates. With rising national debts, and higher interest rates in the recent past, the total interest expense is expected to rise considerably in future years.
|Year||Total United States Interest Expense (on Treasury debt securities; rounded to the nearest billion dollar, as per fiscal year end)|
Source: U.S. Treasury Department (https://www.treasurydirect.gov/).
The Debt Ceiling (Limit)
The United States has an official Congressional limit on how much it can borrow. Because the federal government continues to borrow more and more each year, this limit has been reached and then raised by Congress many times. If the limit is reached and the government doesn’t raise the limit, then parts of the government will need to be shut down and some government employees will not be able to get paid. Frequently the government doesn’t raise the limit right away because politicians use the limit to negotiate their position on the budget (or other issues). For example, some politicians will only raise the limit if Congress promises to significantly cut overall spending. Or other politicians will raise the limit only if Congress spends more money on their favorite items (climate, social programs, defense, building a wall, etc.). After several weeks of government shutdown, complaints by the public and government employees, and political negotiations, Congress then passes a higher debt limit and the debt will rises until another limit is reached. The first time Congress raised the debt limit was in June of 1940. Since then it has raised the debt limit 92 times.