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The U.S. national debt has reached a new milestone, surpassing $37 trillion in January 2023, according to the latest Treasury Department report. This debt growth is a cause for concern for various financial experts, including the Peter G. Peterson Foundation and Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

Rising Borrowing Costs

Interest payments on the national debt are expected to nearly double from about $1 trillion in 2025 to $1.8 trillion by 2035, reflecting higher borrowing costs as debt grows and interest rates fluctuate. This increase in interest payments means more federal revenue will be directed away from other priorities just to service the debt.

Impact on Private Investment

Higher government borrowing can lead to increased interest rates, which raises the cost of borrowing for families and businesses. This situation can "crowd out" private investment because businesses face higher borrowing costs, potentially slowing job creation, wage growth, and overall economic growth.

Federal Budget Priorities

With rising debt and interest costs, federal spending is projected to grow faster than the economy even after some recent spending restraint efforts. For example, federal spending as a share of GDP is forecast to increase from 23.4% in 2024 to 23.8% in 2034 despite recent reforms, meaning fiscal pressure will continue. Mandatory programs like Medicaid will see growth slow but still place increasing demands on the budget. The growing debt restricts the federal government's flexibility to invest in priorities such as infrastructure, education, or emergency responses.

Broader Economic Risks

Sustained large and growing debt levels—already exceeding 119% of GDP—pose risks to economic stability and resilience, and could limit the government's ability to respond to future crises or undertake investments that support long-term economic growth.

The U.S. is currently adding a trillion more to the national debt every 5 months, which is more than twice as fast as the average rate over the last 25 years. This rapid debt accumulation is due in part to more government spending approved after Trump signed Republicans' tax cut and spending legislation earlier this year, as well as the multi-year COVID-19 pandemic starting in 2020.

The result of the Republicans' tax law is estimated to add $4.1 trillion to the national debt over the next decade. Wendy Edelberg, a senior fellow at the Brookings Institution, emphasizes that this continuous borrowing will persist over the course of 2026, 2027, and beyond.

The Joint Economic Committee estimates that at the current average daily rate of growth, another trillion dollar increase to the debt would be reached in approximately 173 days. The federal government borrowed heavily under both President Donald Trump and President Joe Biden during the pandemic.

Government borrowing puts upward pressure on interest rates, according to the Peter G. Peterson Foundation. This, in turn, adds costs for everyone and reduces 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 Government Accountability Office has outlined potential impacts of rising government debt on Americans, including higher borrowing costs for mortgages and cars, lower wages, and more expensive goods and services.

Experts emphasize the urgent need for policy actions to slow debt growth and improve fiscal sustainability. The Congressional Budget Office and fiscal experts have called for a comprehensive approach that includes both spending cuts and revenue increases. As the national debt continues to rise, addressing this issue becomes increasingly important for the future of the U.S. economy.