As government deficit spending diminishes economic growth, it pushes the nation’s economic output, the GDP, well below its potential.
The U.S. national debt has crossed an ominous threshold, rising above 100 percent of national gross domestic product, or GDP. This is the first time since World War II that debt has been so high a percentage of national economic output.
That is a big problem because the federal debt undermines the value of the U.S. dollar and diverts investment from the wealth-creating private sector. The rising debt and its pressure on the nation’s economy will force the federal government and Federal Reserve, the latter led by newly confirmed chair Kevin Warsh, to make hard decisions they have put off for decades.
Many among the public will suffer as a result, especially the elderly, who rely on Social Security and Medicare.
GDP is the total amount of spending in the nation’s economy. At the end of March, federal debt held by the public was $31.265 trillion, and GDP in 2025 was $31.216 trillion.
The rise of debt-to-GDP is accelerating because the federal budget is structurally unsound. The government “is spending $1.33 for every dollar it collects in revenue, and the budget deficit this year is projected at $1.9 trillion,” the Wall Street Journal reports.
Over the past two decades, the annual federal budget deficit has expanded far beyond what was normal from 1950 to 2007, which was about 25-45 percent. The federal debt quadrupled from 1970 to 1990, tripled from 1990 to 2000, and has doubled in each decade throughout this century.
Federal revenue has continued to increase. The problem is that spending is rising much more rapidly, pushing the annual budget deficit up to almost 6 percent of GDP, accelerating the increase in the national debt. As a result, the debt-rise trendline is becoming much steeper.
This is the first time the nation’s debt-to-GDP ratio has been so high without a major crisis such as a war or pandemic. There is no excuse for the recent increases in the federal debt. The federal deficit decreased by 63 percent between 2020 and 2022, erasing all the pandemic increase. Discretionary spending hikes have pushed the deficit up since then.
The numbers show that the federal government has spent the period since 1974 borrowing enormous amounts of money to spend on vote-buying with ever-greater income-transfer payments.
