America’s fiscal situation has become increasingly worrisome heading into 2025, with the federal debt now exceeding 100% of the nation’s Gross Domestic Product.
New data shows that within the past 12 months, the national debt has soared from $33.8 trillion to almost $36.3 trillion, marking a $2.5 trillion increase.
Economists and policy experts project that the nation’s debt will continue growing rapidly. If current trends hold, the gross national debt could reach $37 trillion within five months, climb to $39.2 trillion in 2026, and approach $40.95 trillion in 2027, based on the most recent Congressional Budget Office forecast.
Romina Boccia, director of Budget and Entitlement Policy at the Cato Institute, said this fast-growing debt load has already had measurable effects. She explained that over the last four years, heavier federal spending and debt have contributed to depressed economic growth, which has led to declines in take-home pay, job opportunities, and entrepreneurship.
Another factor driving the debt is the rising average interest rate on government borrowing. That rate jumped from 2.378% five years ago to 3.155% today. Interest payments account for a significant portion of the current debt growth, fueling what some lawmakers have called a “completely unsustainable” cycle of spending.
Higher rates on government debt are being felt throughout the economy, pushing up the cost of home mortgages, car loans, and business loans. Boccia said this signals a broader concern for American families and businesses alike.
Boccia also pointed to entitlement programs such as Medicare, Medicaid, and Social Security as major drivers of federal spending. She explained that unless these programs undergo significant reforms, their costs will continue to add to the federal debt.
Though reducing spending on these programs can be politically challenging, Boccia suggested that Congress consider forming an independent commission that could recommend policy changes, giving legislators a way to address the problem while avoiding some of the political fallout.