The United States has crossed a financial threshold that, for many, seemed a distant worry just a few years ago. On August 15, 2025, the Treasury Department reported that the U.S. national debt had soared past $37 trillion, setting a new record and igniting debate in Washington and beyond about the country’s fiscal future. Not only is this a staggering number in itself, but it also arrived years ahead of projections made before the COVID-19 pandemic, underscoring just how quickly the nation’s finances have shifted.
According to the Treasury Department’s daily finances report, the gross national debt eclipsed $37 trillion—an amount that now stands at 120% of the U.S. Gross Domestic Product (GDP). To put it plainly, America owes more than its entire economy produces in a year. The Congressional Budget Office (CBO), in its January 2020 outlook, hadn’t expected this milestone to be reached until after fiscal year 2030. But a combination of historic events, policy choices, and economic shocks has accelerated the debt clock at a breathtaking pace.
How did we get here? The answer, as reported by the Associated Press and other outlets, is a tale of crisis-driven spending, political maneuvering, and mounting obligations. The multi-year COVID-19 pandemic, beginning in 2020, triggered massive federal borrowing as both President Donald Trump and President Joe Biden pushed through relief measures to stabilize the economy and support recovery. Those emergency actions were, by many accounts, necessary, but they came at a steep price. The debt, which stood at $34 trillion in January 2024, jumped to $35 trillion in July 2024, hit $36 trillion in November 2024, and now, less than a year later, sits at $37 trillion. That’s an increase of $2 trillion in just twelve months.
Michael Peterson, chair and CEO of the Peter G. Peterson Foundation, summed up the growing concern: “We are now adding a trillion more to the national debt every 5 months. That’s more than twice as fast as the average rate over the last 25 years.” Peterson warned that government borrowing “puts upward pressure on interest rates, adding costs for everyone and reducing private sector investment. Within the federal budget, the debt crowds out important priorities and creates a damaging cycle of more borrowing, more interest costs, and even more borrowing.”
The rapid increase isn’t just a product of pandemic spending. Earlier this year, former President Trump signed into law a Republican-led tax cut and spending package. According to the CBO, this legislation alone is projected to add $4.1 trillion to the national debt over the next decade. Wendy Edelberg, a senior fellow at the Brookings Institution, didn’t mince words: “The result of the Republicans’ tax law means that we’re going to borrow a lot over the course of 2026, we’re going to borrow a lot over the course of 2027, and it’s just going to keep going.”
But what does this mean for everyday Americans? The Government Accountability Office (GAO) has outlined several concrete impacts. As government borrowing increases, so do interest rates, which translates into higher costs for mortgages, car loans, and other forms of personal and business borrowing. Businesses may find themselves with less capital to invest in growth or hiring, potentially leading to lower wages and more expensive goods and services. In other words, the effects of the ballooning debt are not confined to Washington—they ripple out into households and communities across the country.
Digging into the numbers, the U.S. is spending more than it brings in most months—nine out of the last twelve, to be exact. The only exception is typically April, when tax revenues peak. The federal government’s commitments are vast: four items alone—Medicare, Social Security, national defense, and interest payments—consume 60% of the $7.9 trillion annual budget. Medicare and Social Security together make up a third of all spending, with defense at 14% and interest payments at 12.5%. If interest payments keep growing, the government may have to make difficult choices. Social Security, for instance, is projected to become insolvent by 2032, potentially requiring a 24% reduction in benefits unless Congress intervenes.
Who holds America’s debt? Foreign and international investors own the largest share, at 23%. U.S. government accounts hold 20%, domestic investors 17%, and the Federal Reserve 12.8%. The rest is scattered among state governments, mutual funds, financial institutions, and insurance companies. While this diversity can be seen as a strength—spreading risk and providing reliable investment vehicles—it also means that a significant portion of American debt payments flows overseas, funding the saving and investing of other countries.
With debt mounting, the specter of the debt ceiling looms large. Congress had suspended the debt ceiling in 2023, but it was reinstated on January 1, 2025. The Treasury began taking extraordinary measures to avoid default, but resources were projected to run dry by September 2025. That crisis was averted when the so-called "One Big, Beautiful Bill" raised the debt ceiling to $41.1 trillion, allowing the government to keep borrowing. Yet this only pushes the reckoning further down the road. As interest payments swell, there are growing fears that they could crowd out vital government functions.
The Joint Economic Committee estimates that, at the current average daily growth rate, the U.S. will add yet another trillion dollars to the debt in just 173 days. Maya MacGuineas, president of the Committee for a Responsible Federal Budget, voiced a sentiment that’s gaining traction: “Hopefully this milestone is enough to wake up policymakers to the reality that we need to do something, and we need to do it quickly.”
As Congress debates how to rein in spending or raise new revenues, the political divide remains sharp. Some lawmakers argue that cutting entitlements like Social Security or Medicare is necessary to restore fiscal balance, while others warn that such cuts would devastate millions of Americans who rely on those programs. There are also calls for tax reform, with proposals ranging from closing loopholes to raising rates on the wealthy or corporations. Meanwhile, the debate over how to support vulnerable groups—such as women and mothers—continues, with some programs to ease their financial burdens still hotly contested in Congress.
For now, the United States finds itself in uncharted territory: a record-setting national debt, persistent budget deficits, and a political system struggling to find consensus. The next trillion-dollar milestone, it seems, is just around the corner—unless policymakers chart a new course.
