What you need to know
Every few years, Republicans and Democrats clash over raising the national debt limit. They issue warnings about the consequences of not raising the limit—known as default—and argue over whether increases should come with spending cuts, tax hikes, or other policy adjustments. For Americans, this drama raises the question: Why does the U.S. have a national debt—and how can we manage it?
- What is the national debt?
- Where did the debt come from, and how large is it?
- Are both political parties responsible for the national debt?
What Is The National Debt? What Is The Debt Limit?
The U.S. national debt mainly consists of bonds that the government issues to fund budget deficits. Investors, businesses, and foreign governments buy these bonds. Congress sets a debt “ceiling”—the maximum allowable level for the national debt. In 2023, Congress passed the Fiscal Responsibility Act, suspending the debt limit until January 1, 2025, at which point it reset at $36.1 trillion, matching the then current outstanding debt. In March 2024, House Republicans passed a budget proposal raising the ceiling by another $4 trillion.
Contrary to common misconceptions, raising the debt limit doesn’t authorize new spending; it simply lets the government pay for expenses already approved. For example, if the 2025 budget allocates $4.3 trillion in spending but collects only $3.1 trillion in taxes, the $1.2 trillion shortfall (the deficit) must be financed through debt to honor existing commitments.
How Large Is The National Debt?
This figure shows the growth of U.S. national debt over time (left axis), compared with U.S. Gross Domestic Product (GDP) as a benchmark (right axis). For decades, federal revenues have stayed consistently near 17% of GDP, while federal spending has risen notably in the past 20 years, reaching about 26% of GDP.
Notice that both the national debt and GDP began rising steadily around the 1970s and have continued upward since. Why does our national debt keep increasing? Debt rises when the federal government spends more in a year than it collects from taxes, tariffs, and fees—this annual shortfall is called a deficit. Additionally, debt grows simply through interest payments, which accumulate year after year.
Several factors explain these increases. During WWII (1939-1945), the Korean War (1950-1953), and the New Deal era, government spending was high, but the top marginal tax rate was also extremely high—94% in 1944 on incomes over $200,000 (about $2.5 million today). From the 1960s to the 1980s, however, top marginal tax rates fell, even as spending continued to rise, causing frequent deficits. Since 1960, the U.S. had budget surpluses in only six years—not enough to significantly reduce the debt. As a result, Congress has raised the debt ceiling many times, as shown below.
What Are The Consequences of a Large National Debt?
The consequences of national debt are challenging for legislators to address because their impact is mostly felt by future generations. With the U.S. debt currently around $36 trillion—growing by nearly $100,000 per second—future generations will bear much of this burden.
The current (April 2025) House budget proposal includes $1.8 trillion in spending cuts and $4.5 trillion in tax reductions, which together would increase the deficit by about $1.6 trillion, requiring an additional debt limit increase of roughly $4 trillion.
The Takeaway
Debates over the national debt and debt limit regularly resurface in American politics.
Raising the debt ceiling doesn't authorize new spending, it highlights ongoing gaps between federal revenue and expenses.
At different times, both parties have supported increasing the limit to cover obligations already made.
As policymakers consider spending cuts, tax adjustments, and debt limit changes, their choices have implications beyond immediate budgets, influencing economic opportunities and challenges for future generations.
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Further reading
- Gravelle, Jane G., & Marples, Donald J. (2022). “Addressing the Long-Run Deficit: A Comparison of Approaches.” Congressional Research Service. https://tinyurl.com/mr48b22u
- Aron-Dine, Aviva. March 29, 2007 Center on Budget and Policy Priorities. New study finds dramatic reduction since 1960 in the progressivity of the federal tax system. Retrieved March 28, 2025, from https://tinyurl.com/mr3czayu
- U.S. Congress. June 3, 2023 . H.R.3746 - Fiscal Responsibility Act of 2023 118th Congress. Retrieved March 28, 2025, from https://tinyurl.com/mthf355s
Sources
Kogan, Richard. February 27, 2025. Center on Budget and Policy Priorities. Under house budget plan, debt limit would likely be reached by fall 2026. Retrieved February 5, 2025, from https://tinyurl.com/ycwyjf7z
Tax Foundation. August 24, 2021. Historical income tax rates and brackets. Retrieved March 28, 2025, from https://tinyurl.com/4szxmzy6
U.S. Congress. (06/03/2023). H.R.3746 - 118th Congress: Summary. Retrieved March 24, 2025, from https://tinyurl.com/488ut5m7
U.S. Treasury (2025) Historical Debt Outstanding , https://tinyurl.com/3jkrwhuc, accessed 4/8/25
World Bank (2025) GDP: Gross Domestic Product, https://tinyurl.com/yeyv24ce, accessed 4/8/25
Contributors
Lindsey Cormack (Content Lead) is an Associate Professor of Political Science at Stevens Institute of Technology and the Director of the Diplomacy Lab. She received her PhD from New York University. Her research explores congressional communication, civic education, and electoral systems. Lindsey is the creator of DCInbox, a comprehensive digital archive of Congress-to-constituent e-newsletters, and the author of How to Raise a Citizen (And Why It’s Up to You to Do It) and Congress and U.S. Veterans: From the GI Bill to the VA Crisis. Her work has been featured in The New York Times, The Washington Post, Bloomberg Businessweek, Big Think, and more. With a drive for connecting academic insights to real-world challenges, she collaborates with schools, communities, and parent groups to enhance civic participation and understanding.
William Bianco (Research Director) is Professor of Political Science at Indiana University and Founding Director of the Indiana Political Analytics Workshop. He received his PhD from the University of Rochester. His teaching focuses on first-year students and the Introduction to American Government class, emphasizing quantitative literacy. He is the co-author of American Politics Today, an introductory textbook published by W. W. Norton, now in its 8th edition, and authored a second textbook, American Politics: Strategy and Choice. His research program is on American politics, including Trust: Representatives and Constituents and numerous articles. He was also the PI or Co-PI for seven National Science Foundation grants and a current grant from the Russell Sage Foundation on the sources of inequalities in federal COVID assistance programs. His op-eds have been published in the Washington Post, the Indianapolis Star, Newsday, and other venues.
