US Debt Inches Closer to 100 Percent of GDP—What to Know

America’s red ink is back in the spotlight as the national debt is inching closer to overtaking the economy.

The U.S. government has regularly recorded grim fiscal milestones over the last 20 years.

A surging national debt, a bloated budget deficit, and interest payments are some of the financial challenges gripping Washington. Officials are at an impasse about what to do with the mounting IOUs.

Americans do not expect a solution anytime soon.

Fiscal confidence across party lines is at the lowest level in two years, according to new polling data from the Peter G. Peterson Foundation released last month.

Here is what to know about the federal debt and its impact on the world’s largest economy.

Debt-to-GDP Ratio

As of June 5, the national debt stood at nearly $39.22 trillion, according to the Treasury Department’s Debt to the Penny dashboard.

Within the national debt are two categories: debt held by the public and intragovernmental holdings.

Debt held by the public is money borrowed from global financial markets, including individual investors, pension funds, banks, and foreign governments.

This totals almost $31.6 trillion.

Intragovernmental holdings are internal IOUs between federal accounts, such as the Social Security Trust Fund and the Civil Service and Military Retirement Funds.

This equals $7.62 trillion.

At the end of the first quarter, the nominal gross domestic product (GDP) was $31.812 trillion, up from $31.42 trillion in the fourth quarter.

While the cumulative national debt has already overtaken the economy—123 percent—economists place more emphasis on the ratio of public debt to GDP.

That ratio gauges the government’s actual borrowing from markets and influences credit risk, interest rates, inflation, and Treasury yields.

The public debt-to-GDP ratio sits at 99.3 percent. The last time it topped 100 percent was during the Second World War.

Traveling to 2056

The Congressional Budget Office, a nonpartisan budget watchdog, released its long-term budget outlook in February.

Officials estimated that public debt will rise to a record 108 percent of the gross domestic product in 2030. It will then edge higher to 129 percent of GDP by 2040 and reach 175 percent of GDP by 2056.

This is higher than the 156 percent the CBO had predicted in last year’s outlook, driven by a widening gap between spending and revenue.

Revenues are forecast to increase from around 17 percent to nearly 19 percent of GDP by 2056. Spending is projected to rise from 23.1 percent of GDP to nearly 28 percent by 2056.

A Question of Sustainability

The sustainability of the U.S. fiscal picture has been a subject of debate for decades.

Reining in the national debt should be a top priority for Washington, says Sen. Roger Marshall (R-Kan.).

“The biggest threat to this country is our national debt, and again, the national debt threatens our military, threatens education, roads and bridges, and all those types of things as well,” Marshall told The Epoch Times. “So I think that should be our goal.”

In response to the CBO’s updated numbers, the Committee for a Responsible Federal Budget said these forecasts show that debt and deficits will reach “increasingly unsustainable levels over the coming decades.”

“As debt grows and deficits rise, policymakers’ flexibility will erode—making it increasingly difficult to put the nation on a sustainable fiscal path,” the independent policy organization stated in a March 2 report.

“We encourage lawmakers to act on our fiscal problem immediately and avoid a fiscal crisis.”

Former Fed Chair Jerome Powell says trends are not positive for the United States.

“The path is not sustainable. It will not end well if we don’t do something fairly soon,” Powell said in March.

Economists at the University of Pennsylvania’s Wharton School say they believe the U.S. economy can sustain a debt-to-GDP ratio of about 210 percent.

“Above this level, there is no feasible future additional tax on broad-based labor income that can finance the interest payments at the returns demanded by financial markets,” they wrote in a June 4 paper.

‘Ferguson’s Law’

As a share of the GDP, interest outlays are nearing a record high of 3.16 percent.

Economic historian Niall Ferguson, in a February 2025 paper for the Hoover Institution, proposed “Ferguson’s Law”—named after 18th-century economist Adam Ferguson.

The idea is that a major economy that spends more on servicing its debt than on defense “risks ceasing to be a great power.”

Last year’s paper spotlights the “Ferguson limit,” meaning “the point at which interest payments exceed defense spending, as the tipping point after which the centripetal forces of the aggregate debt burden tend to pull apart the geopolitical grip of a great power.”

In recent years, net interest payments have competed with national defense outlays for the top spot in the Monthly Treasury Statement.

Fiscal year-to-date, interest costs have totaled $616 billion, compared with $558 billion in defense spending, according to the Treasury Department.

Nathan Worcester contributed to this report.