The U.S. government learned last week that it may have reached an unfortunate milestone: The size of its debt surpassed the nation’s total economic output.
It was a striking imbalance, according to early estimates, one that the country has experienced only in rare circumstances — briefly during the pandemic, and in the aftermath of World War II. But the development barely seemed to register in the nation’s capital, where few policymakers bothered to acknowledge the latest warning sign about the government’s poor fiscal health.
The root of the problem is well-documented and widely known. U.S. debt has soared in recent years because of a mismatch between federal spending and tax revenue, one complicated by a rapidly aging population, which has driven up costs across government.
For economists, the fear is that these conditions are inching the United States toward a fiscal crisis, one in which its debt is so great that the country can’t easily afford to pay the rising interest on it. But their warnings have long gone unheeded in Washington, calcifying the strains on the government’s balance sheet in ways that President Trump’s agenda is expected to exacerbate.
Despite winning a congressional majority, Republicans have cut little in spending over the past year. With the few savings they did achieve, they put that money toward offsetting a fraction of the cost of Mr. Trump’s tax cuts, which are still expected to add more than $3 trillion to the debt in the coming years.
Those fiscal risks aren’t yet fully realized in the total federal debt held by the public, which topped about $31.26 trillion in March, federal records show. By comparison, the nation’s nominal gross domestic product, a measure of its output using current dollars, reached $31.21 trillion in the 12-month period ending in March, according to data released last Thursday and analyzed by the Committee for a Responsible Federal Budget, which supports deficit reduction.
As a result, the ratio of debt to G.D.P. — a widely regarded metric for assessing the government’s fiscal health — slightly exceeded 100 percent in the committee’s calculations. That last occurred for a short period in 2020, as the pandemic clobbered the economy and government shelled out trillions in emergency relief, the group found.
Marc Goldwein, its senior vice president, said the symbolic milestone helped to illustrate the fiscal risk facing the United States. If its debt continues to grow faster than the economy, he said, it will only become more expensive for the government to borrow money, as investors demand higher yields on bonds to finance that debt.
“When that happens, at some point, you’re in this debt spiral,” Mr. Goldwein said. “The only way to stop it is through some kind of big shock to the system.”
Yet the reaction on Capitol Hill appeared muted, despite years of hand-wringing among Republicans, in particular, about the need for fiscal restraint.
Representative Jodey Arrington, Republican of Texas and chairman of the House Budget Committee, described the new level of the nation’s debt as a “flashing red light” for the economy, but he acknowledged that both parties were responsible for “sleepwalking off of a cliff.”
“I think, unfortunately, too many people are used to these flashing red indicators that we have significant structural problems with America’s balance sheet,” he said.
Nor did the Trump administration have anything to say directly about the level of debt surpassing economic growth. Kush Desai, a White House spokesman, claimed instead that the government’s fiscal standing had actually improved under Mr. Trump, as he pointed to work to “slash the pervasive waste, fraud and abuse in federal spending.”
To be sure, economists and policymakers do not believe the U.S. government is staring down an imminent calamity. For one thing, it is possible that the nation’s fiscal crunch eases some, at least on paper, if economic growth picks up and spending slows, as the Trump administration anticipates.
In the first three months of the year, the U.S. economy grew at an annual rate of about 2 percent, according to federal data released last week. Mr. Trump’s advisers have long proclaimed that growth would accelerate, citing the president’s agenda and other trends, including the rise of artificial intelligence, though the war with Iran has dampened some experts’ outlook.
The federal budget deficit — the annual gap between what the government spends and what it takes in through taxes and other revenue — fell in the first six months of the current fiscal year, according to congressional figures. But the Trump administration itself has recently estimated that the annual imbalance will still reach around $2 trillion by the end of fiscal 2026, which could mark an increase from a year earlier.
Adding to the challenges, the U.S. government is just beginning to refund billions of dollars collected from Mr. Trump’s once-vaunted, and now illegal, global tariffs, with the first checks expected to reach businesses next week. That could further rattle the nation’s finances, just as the Trump administration simultaneously confronts the potentially towering cost of the Iran war.
All of the data could still be revised in the coming months. But budget experts nonetheless say it raises concern about the rate of growth in U.S. debt — and the signals that it sends to the global economy. Well before last week, the three major credit ratings agencies had each downgraded the United States, pointing to the country’s mounting and long-unresolved fiscal constraints as reason to doubt its financial outlook.
The poor marks in recent years have also spurred concerns that unchecked debt could lead investors to demand higher payments on government bonds, making borrowing more expensive for Washington. Yields on those bonds have jumped repeatedly under Mr. Trump, most recently because of the war with Iran, sending the 30-year bond to about 5 percent at one point this week before later settling.
Such costs tend to ripple through the economy, so high yields on government bonds can also make it more expensive for consumers and businesses to borrow money, said Joe Seydl, a senior markets economist for J.P. Morgan Private Bank.
“We’re already in territory where this is putting upward pressure on interest rates and it is having an economic effect,” he said of the current debt, though he cautioned that it certainly had not precipitated “any sort of fiscal crisis.”
In its annual report, the nonpartisan Congressional Budget Office projected in February that the government’s debt would outpace economic growth this year — and worsen in the years to follow. Pointing to a changing, aging work force, the scorekeeper estimated that U.S. debt held by the public would soar to 120 percent of gross domestic product by the end of 2036.
If that occurred, the budget office warned, the “risk of a fiscal crisis” would increase, eroding trust in the dollar and constraining the ability of lawmakers to “respond to unforeseen events or for other purposes, such as to promote economic activity or strengthen national defense.”
Other countries, including Japan, Greece and Italy, report debt levels that outpace their annual output, according to data compiled by the International Monetary Fund. But those economies are not as large as that of the United States, nor do their currencies occupy the same, pivotal role as the dollar in the global financial order.
Still, the warnings from the C.B.O. earlier this year produced little more than political recriminations on Capitol Hill, where Democrats and Republicans have long avoided addressing the country’s greatest fiscal strains, including the future finances of Medicare and Social Security.
If anything, the two parties found rare unity last year in rejecting many of Mr. Trump’s attempts to cut spending, as they looked to protect popular education, health, labor and social programs that serve millions of families. That only emboldened the White House to try to slash those programs on its own through potentially illegal means.
In the meantime, Republicans under Mr. Trump added to the debt, chiefly through enacting their package of tax cuts last year. William McBride, the chief economist at the Tax Foundation, which generally supports lower taxes, said that the cuts may have “sped up the inevitable,” perhaps bringing “those really high and dangerous levels of debt closer in time, maybe a few years.”
Republicans, including Mr. Arrington, have long argued that some of the tax cuts essentially pay for themselves by stoking economic growth, generating more revenue. But another, earlier analysis from the Congressional Budget Office projected the bill would boost G.D.P. while still increasing deficits, partly by making borrowing more expensive.
Mr. McBride said the problem would only be compounded by Mr. Trump’s push for a massive increase in military spending, which he hopes to set at nearly $1.5 trillion starting next fiscal year. The president first indicated he would seek the boost, the largest in modern history, before declaring war on Iran — and since has suggested that the administration could seek additional money for that conflict.
If the boost to the Pentagon were to become a permanent and unfunded fixture of the budget, Mr. McBride said it would greatly exacerbate the debt. Plus, he added: “The Treasury market would notice that.”
