US national debt surpasses $40 trillion, debt-to-GDP ratio hits 124%

America’s national debt is climbing higher with few solutions in sight. Total public debt outstanding exceeded $40 trillion for the first time in history — that’s nearly $300,000 per household. This figure should alarm every American, yet years of political promises of easy fixes have dulled the public’s sense of urgency.

As America races past the grim, $40-trillion milestone, it is essential to confront why such a high debt is an existential threat to our republic and what realistic solutions remain.

The most common benchmark is the debt-to-GDP ratio. Total U.S. public debt now exceeds 124% of GDP. Only a handful of countries rank worse — among them Sudan, Venezuela, and stagnant developed economies like Japan, Greece and Italy.

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No country should aspire to rank among the highest in this metric, yet America does.

Even debt held by the public, over $32 trillion, stands near 100% of GDP. And according to the Congressional Budget Office, it’s projected to reach 120% by 2036.

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A rising debt-to-GDP ratio signals America’s eroding capacity to service existing obligations without heavy reliance on borrowing. Overwhelming national debt slows economic growth, puts upward pressure on inflation and interest rates, reduces investor confidence, diminishes the American dollar’s standing as the global currency and may even spur a fiscal crisis.

These aren’t just theoretical risks — exorbitant debt produces concrete economic damage. One outcome is the crowding-out effect. Here’s how it works:

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The government borrows to pay back debt obligations. It does so by selling bonds to finance deficits. This reduces the supply of available funds in the market. The result is upward pressure on interest rates and less capital for private investment. This makes it more difficult for businesses to borrow and invest in job creation, innovation and expansion or for individuals to take out loans.

In short, more debt means less free-flowing money in the economy.

The Congressional Budget Office estimates that for every dollar the deficit increases, private investment falls by 33 cents. Still more, an additional $1 trillion in debt reduces long-run U.S. capital stock of productive assets by 0.7-0.8%. More government debt means less private capital formation, slower productivity growth, and, ultimately, less money in the pockets of Americans.

These effects are quiet but damaging. Unlike sudden shocks to the economy — trade disruptions, technological developments or global conflicts — the debt compounds over time. It’s a handy tool for politicians to paper over today’s problems with massive amounts of spending while shifting the burden to future generations.

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Some politicians have absurdly denied the danger of the debt, instead convincing the public that America can spend without limit. The theory undergirding that argument is Modern Monetary Theory (MMT) and has been advocated by Democrat New York Rep. Alexandria Ocasio-Cortez and Vermont Independent Sen. Bernie Sanders’s top economist.

A rising debt-to-GDP ratio signals America’s eroding capacity to service existing obligations without heavy reliance on borrowing. 

They argue that an issuer of fiat currency as powerful as the United States can always spend its way out of crisis. Yet they disregard crowding-out effects, the erosion of consumer confidence and the fact that currency ultimately rests on real economic value. Treating the dollar as unlimited political fuel is a sure path to runaway inflation and a loss of fiscal credibility.

Prudent economic policy means confronting sustained levels of deficit spending and high national debt before the two grow further out of control. Net interest costs have already surpassed $1 trillion annually and are projected to climb sharply, reaching more than $2 trillion within a decade and consuming a greater share of federal revenues.

The straightforward solution is to eliminate federal deficits and balance the budget. Recent data records a $1.8 trillion deficit in 2025. The government must instead run a surplus and begin repaying its outstanding debt obligations.

Restraining spending growth — particularly in major entitlement programs driving long-term imbalances — and unleashing the American economy via policies that expand the productive private sector are essential. Incremental efficiency efforts, including state-level DOGE reform, help at the margin, but structural reform is necessary to ensure a sustainable budget.

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Both parties spent the United States into this $40 trillion mess, so it is the bipartisan responsibility of lawmakers to commit themselves to decisive fiscal action now. Inaction guarantees higher interest payments, reduced private investment, diminished fiscal flexibility in times of crisis and a heavier tax or inflation burden on future generations.

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The clock is ticking, and the choice is simple: Act now or mortgage America’s future.

Michael Bicksel is a former member of the Heritage Foundation’s Young Leaders Program.