Understanding the Scale and Impact of the U.S. National Debt

The domestic policy bill currently under debate in the House is projected to increase the federal debt by $3.4 trillion over the next ten years, adding to the existing $29 trillion owed by the United States.

Such enormous figures can be hard to grasp, but the debt represents money spent by Americans today that future generations will need to repay with interest. In fact, next year the interest payments on this debt are expected to surpass $1 trillion for the first time, exceeding expenditures on Medicare.

However, not all debt holds the same implications. A trillion dollars carries different significance depending on the country, so it is important to assess the debt in context.

So how can Americans better understand the scale and impact of the national debt? Economists use several approaches to evaluate it beyond the sheer dollar amount. Here, we explore three common methods and how the United States compares.

1. Debt Relative to Gross Domestic Product (GDP)

Context is key. While $29 trillion is an enormous sum—among the largest budget deficits ever recorded by a developed country not at war—the United States also has the world’s largest economy.

Economists frequently compare a nation’s debt to its economic output, or GDP. Currently, U.S. debt is roughly equal to its GDP, a threshold also reached by countries like Japan and Italy, but not many others.