The Breakdown: The national debt is the total amount of money that the US Federal Government has borrowed throughout the country’s history and has not yet fully repaid.
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The US National Debt
A budget deficit occurs when the federal government spends more money than it takes in during a fiscal year. To make up for this deficit, the government needs to borrow money. In order to borrow money, the government sells marketable securities like Treasury bonds, bills, notes, floating rate notes and Treasury inflation-protected securities (TIPS).
The US national debt is the accumulation of the money the government has borrowed over the years, including interest owed, to finance various projects and programs that it hasn’t fully repaid. The government has recurring deficits year after year, which is common, causing the national debt to grow.
As of February 2023, the current US national debt stands at $31.46 T, a staggering amount that has increased steadily over the past several decades due to various factors, including wars, economic downturns and the rising costs of social programs such as Social Security and Medicare.
Debt to Gross Domestic Product
Comparing a country’s debt to its gross domestic product (GDP) helps determine its ability to pay off the debt. This ratio is a better indicator of the country’s fiscal situation than just looking at the national debt number alone because it shows how heavy the debt burden is compared to the country’s total economic output. Essentially, the debt to GDP ratio reveals whether the country will feasibly be able to repay its debt given its economic resources.
For context, the US debt to GDP ratio surpassed 100% in 2013 when both debt and GDP were approximately 16.7 trillion. The US national debt 2023 total, currently sitting at $31.46 T, represents roughly 130% (an all-time high) of the US Gross Domestic Product (GDP), meaning that the US government owes more than the entire value of the goods and services produced by the country in a year.
Spending Categories
The US government spends money in various categories, including defense, healthcare, education and social welfare programs. These groupings of programs, activities or services, also known as budget functions, are used to organize and classify government spending in the federal budget. They help policymakers and the public understand how much the government is spending on different policy priorities and which areas receive the most funding. The budget function structure also facilitates comparisons of spending across different fiscal years, allowing analysts to track changes in spending patterns and identify trends over time.
Here is a high-level overview of the US national debt 2022 breakdown:
16.4% Medicare
14.3% Social Security
12.9% National Defense
11.9% Health
9.7% Income Security
8.1% Net Interest
And the remaining 28% to various other categories, including education, transportation and energy.
Conclusion
The current US national debt is a significant and growing concern for the federal government and the American people as a whole. While there is no simple solution to reduce the current US national debt, a combination of responsible fiscal management, careful budgeting and long-term planning will be a primary issue and point of concern in the years to come.