U.S. National Debt Surpasses $38 Trillion Amid Shutdown Concerns

The national debt of the United States has officially surpassed $38 trillion for the first time, as reported by the U.S. Department of the Treasury in its daily updates. This milestone coincides with ongoing government shutdown negotiations, highlighting the fiscal challenges facing lawmakers. The growing debt has raised alarms among Republicans and some centrist Democrats, who express concern over the sustainability of federal spending.

The national debt, which first breached the $1 trillion mark in 1981, has continued to climb with little action from Congress to curb spending. Despite longstanding calls from Republicans for significant spending cuts, the trajectory of the debt remains upward. According to Michael A. Peterson, CEO of the Peter G. Peterson Foundation, the pace at which the U.S. is accruing debt is alarming. He noted that the nation is adding debt at a rate that is twice the growth rate experienced since 2000.

“Along with increasing debt, you get higher interest costs, which are now the fastest growing part of the budget,” Peterson stated. Over the last decade, the U.S. has spent $4 trillion on interest payments, a figure projected to escalate to $14 trillion in the next ten years. This surge in interest costs threatens to limit vital public and private investments, ultimately impacting the broader economy.

Recent estimates from the nonpartisan Congressional Budget Office (CBO) indicate that net interest on the public debt is expected to reach $1.03 trillion in fiscal 2025, an increase from $949 billion in fiscal 2024. The CBO also projected a federal budget deficit of $1.8 trillion for fiscal 2025, roughly 6% of the gross domestic product (GDP). This ratio represents a stark reality, as such deficits were rarely seen in peacetime before 2023, apart from during the 2008 financial crisis and the onset of the COVID-19 pandemic.

Romina Boccia, director of budget and entitlement policy at the Cato Institute, characterized the current growth rate of national debt as unsustainable and described it as occurring at a “crisis pace.” She remarked that typically, such rapid debt accumulation is only observed during significant financial emergencies, such as the Great Recession or extensive stimulus measures during the pandemic.

While the current government shutdown and the rising national debt are not directly linked, there are connections. Democrats are leveraging the shutdown to advocate for the renewal of expiring Obamacare subsidies, seeking concessions from the GOP in negotiations. Boccia pointed out that these subsidies contribute approximately $400 billion to the national debt over the next decade, a relatively small but notable factor.

Addressing the nation’s fiscal challenges will likely require difficult political decisions, which lawmakers have historically been hesitant to make. Although there have been attempts to establish a bipartisan fiscal commission, meaningful progress remains elusive. The government shutdown, while marginal, could further exacerbate the national debt, complicating the financial landscape even more.

Mark Hamrick, a senior economic analyst at Bankrate, expressed skepticism about the political will in Washington to change course. “Essentially, Congress has been spending as if there is no tomorrow, and there is literally a bill to be paid for that,” Hamrick remarked, emphasizing the urgency of addressing the growing national debt.

As the U.S. navigates its fiscal future, the implications of this debt milestone extend beyond Washington. The financial decisions made in the coming months may have lasting consequences for the economy, impacting millions of Americans.