The U.S. Treasury data has revealed that the country’s net interest payments on debt as a percentage share of federal revenue reached 18.7% in January, only 0.2% below the 1992 all-time high of 18.9%. The interest expense hit a record $1.2 trillion over the last 12 months. The data also showed that the share had doubled in just 18 months as interest costs skyrocketed. The U.S. federal debt has increased over the last 100 years from $395 billion in 1924 to $35.46 trillion in 2024. Additionally, the U.S. debt-to-GDP ratio surpassed 100% in 2013, when both debt and GDP were approximately $16.7 trillion.
According to the U.S. Treasury, it costs about $392 billion to maintain the U.S. debt as of January 2025, which is 16% of the total federal spending in fiscal year 2025. Net interest costs as a percentage of federal revenues are projected to reach 34% by 2054, assuming no recession occurs over this period.
U.S. debt-to-GDP ratio indicates a looming repayment crisis
The U.S. Treasury’s data revealed that the average GDP for fiscal year 2024 was $28.83 trillion, which was less than the U.S. debt of $35.46 trillion, resulting in a debt-to-GDP ratio of 123%. Consequently, the higher debt-to-GDP ratio indicated that the U.S. government will have greater difficulty in repaying its debt, suggesting a looming repayment crisis. As per the data on February 27th, the debt held by the public was over $28.85 trillion, intragovernmental holdings stood at $7.36 trillion, and the total public debt outstanding was $36.22 trillion.
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On February 5th, the U.S. Government Accountability Office (GAO) issued its annual report on the nation’s fiscal health. The report revealed that publicly held debt was estimated to grow more than twice as fast as the economy, reaching 200% of the size of the economy by 2047. GAO found that the federal government was on an unsustainable fiscal path that posed serious economic, security, and social challenges if not addressed. GAO also projected that under the current revenue and spending policies, debt held by the public will reach a historical high of 106% of GDP by 2027. The report claimed that ‘perpetually rising debt as a share of GDP was unsustainable’ and it had many direct and indirect implications for the economy, American households, and individuals. The risks included slower economic growth and increased chances of a fiscal crisis.
Rising debt creates more challenges for federal fiscal management
The GAO 2025 fiscal health report suggested that the federal government was on an ‘unsustainable fiscal path,’ projecting that public debt would grow faster than the economy each year if current revenue and spending policies were not changed. This unsustainable outlook was consistent with projections from the Congressional Budget Office and the 2024 Financial Report of the United States Government.
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Many of the negative effects of growing debt were projected to intensify over time, creating additional challenges for fiscal management. As per the GAO report, the sooner actions were taken to change the fiscal path, the ‘less drastic’ they would need to be. Congress and the administration also needed to make difficult budgetary and policy decisions to address the key drivers of the debt and improve the government’s fiscal approach.
According to the U.S. GAO, debt held by the public relative to GDP increased during wartime and recessions but then decreased during peacetime and periods of economic growth for most of the nation’s history. However, this pattern has changed more recently as debt has continued to grow even during times of economic growth. The nation’s fiscal outlook is expected to deteriorate as debt accumulates faster than economic growth.
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