The United States of America has surpassed a financial barrier that should worry every taxpayer and politician in the country. This is because the official counter for the debt of the U.S. Treasury Department surpassed $38 trillion for the first time on Wednesday. This is alarming news that signifies yet another milestone for the country’s increasing debt problem. This debt level is equivalent to about 100 percent of the country’s gross domestic product.
Major historic debt milestone sparks widespread economic fears
The national debt of the U.S. had swelled to $38 trillion on October 21, 2025, with $30.4 trillion of the public debt owed by the federal government. It was reported that this was the highest level recorded since 1946, when it stood at 106 percent of economic output following the World War II borrowings. According to Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, the situation was very dire for the United States.
The interest on this staggering debt is now $1.1 trillion, which surpasses what the country pays for national defense and the sum of all nondefense discretionary spending, such as education, law enforcement, and scientific research. One-fourth of these payments go abroad, including payments to countries like China, thus growing their economies instead of investing in the country’s infrastructure.
However, it seems that something is going to give, and that is sooner rather than later,” said Maya MacGuineas, pointing out the need for fiscal intervention, since markets will provide their own solution regardless of whether the USA is ready or not.
The USA also faced the problem of debt after World War II
History provides reason for optimism about the current debt problem because it provides strategies that can help deal with it. In 1946, the nation resorted to borrowing money to finance its participation in World War II. Consequently, the national debt climbed to 106 percent of the country’s GDP. This situation is unusual because, among the countries that found themselves with debt levels this high, the USA effectively lowered the debt without failing.
During the period between 1946 and 1974, the United States managed to lower the debt problem of the country from 106 percent of GDP to merely 23 percent, indicating that the current problem of debt, if handled properly, will not have disastrous effects on the American economy. With the rising interest rates and the debt at historic peaks, the next stewards of the federal government will face very limited fiscal policy choices.
Multiple factors contributed to the current debt accumulation
This debt problem did not result from a single choice that led the way for a build-up of debt over the last 50 years. Some of the factors that have derailed the situation that the nation finds itself in today include increasing healthcare costs beyond the level of inflation, lower corporate income tax revenue, lower excise taxes, and lower growth of the economy. According to Michael Peterson, the CEO of the Peter G. Peterson Foundation, policymakers are failing their basic fiscal responsibilities.
To reach the historic post-WWII level of debt of 23 percent of economic output by 2055, economic growth of 3.2 percent per year, adjusted for inflation, over the next 30 years is needed, according to a new RAND analysis. This is a very ambitious target, but it will save the government over $20 trillion of cumulative inflation-adjusted interest payments over the next 30 years.
This current path poses new threats to the financial independence and national security of America. More of the nation’s tax dollars will go to pay foreign lenders than will go toward keeping Americans secure, responding to emergencies, and addressing the national priorities. In the past, America managed its debt problem effectively, and the nation knows how it can do it again.
