U.S. National Debt Surpasses $38 Trillion

U.S. National Debt Surpasses $38 Trillion: Why It Matters

November 12th, 2025 | By Nathanael Ghez

What is Happening?

As of this week, the United States’ national debt has officially surpassed $38 trillion, an all-time record that has reignited debate in Washington and on Wall Street about the long-term sustainability of federal spending. The debt has been climbing for decades, but the pace has accelerated sharply since the pandemic. Trillions in stimulus programs, higher interest payments, and rising entitlement costs have all contributed to the surge. To put the number in perspective, the U.S. now owes more than 120% of its annual GDP. This means the country’s debt exceeds the size of its entire economy. Servicing this debt is becoming increasingly expensive as interest rates remain elevated. The federal government is projected to spend more on interest payments this year than on national defense. For everyday Americans, this growing debt can translate into higher borrowing costs over time, as large deficits push treasury yields upward and influence everything from mortgage rates to credit card interest.

Why is this Important?

This milestone reflects deeper structural risks in the economy. When debt grows faster than the economy itself, it limits fiscal flexibility. That means less room for the government to respond to future crises or invest in priorities like infrastructure, education, and innovation. It also increases reliance on foreign investors, who hold a large share of U.S. Treasury securities. If confidence in the government’s ability to manage its finances weakens, the cost of borrowing could rise even further. For markets, high debt levels create a complex mix of short-term and long-term pressures. In the near term, investors may view Treasuries as safe assets, but over time, rising interest costs can crowd out other spending, dampen growth, and pressure equity valuations. Inflation could also become harder to control if fiscal policy and monetary policy move in opposite directions, especially if future spending remains high while the Federal Reserve maintains relatively loose conditions. From a policy standpoint, lawmakers face a difficult balance. Cutting spending or raising taxes to slow debt growth risks political backlash and potential economic drag. Ignoring the problem, however, means allowing interest costs to spiral, which could eventually force much sharper adjustments later.

Future Outlook

Going forward, the conversation around the debt ceiling, fiscal discipline, and entitlement reform will likely dominate political and economic discussions in 2026 and beyond. Economists warn that without a credible plan to stabilize debt growth, the U.S. could face downgrades from credit agencies or reduced investor demand for Treasuries. Still, it’s important to recognize that the U.S. maintains one key advantage: its debt is denominated in dollars, the world’s reserve currency. This gives the government more flexibility than most nations, though not immunity from economic consequences. In my view, crossing $38 trillion should serve as a wake-up call rather than a panic signal. It’s a reminder that fiscal strength matters just as much as monetary policy in shaping long-term stability. For students, investors, and policymakers alike, understanding how debt dynamics interact with growth, inflation, and interest rates is crucial. The challenge now is ensuring that the country’s fiscal future remains sustainable without undermining its economic momentum.