Debt Steadily Increasing

Government debt in the United States has steadily increased from $2 trillion in the mid 1980s to over $35.92 trillion in 2023. But as a percent of GDP it has grown from 55 percent to over 130 percent of GDP in 2023.

Government debt, including gross federal, state, and local debt, reached $3 trillion in 1987, and then breached $4 trillion in the recession year of 1990.

In the 1990s debt reached $5 trillion in 1992, and $7 trillion at the peak of the business cycle in 2000.

Debt breached $10 trillion in 2006 and then, in response to the Great Recession of 2006-2008 exceeded $15 trillion in 2010.

Gross debt, including all levels of government, exceeded $20 trillion in 2014 and broke through $25 trillion in 2019. In 2023 total government debt was estimated at $35.92 trillion.

Viewed as a percent of Gross Domestic Product (GDP) government debt shows a different aspect. At 55 percent of GDP in 1985, debt increased as a percent of GDP until the mid 1990s when it peaked at 78.7 percent of GDP in 1995. Then a steady decline in debt as a percent of GDP set in for the rest of the 1990s, declining to 68.8 percent of GDP in 2000. But debt resumed a climb in the 2000s reaching 78 percent of GDP at the peak of the business cycle in 2007.

In the Crash of 2008 government debt increased sharply to bail out the banks and to provide “stimulus” to the economy. Debt reached 101 percent of GDP in 2009, and is estimated at 122 percent GDP in 2015. In 2023 total government debt was estimated at 130 percent of GDP .

Recent Debt by Government Level

Federal debt has increased sharply after the Crash of 2008.

Federal debt stood at 42 percent of GDP in 1985. State government debt was 4.9 percent of GDP and local debt was 8.1 percent of GDP. By the mid 1990s federal debt had increased to 64 percent of GDP. State debt had increased to 5.6 percent of GDP and local debt had increased to 9.1 percent of GDP.

By 2000 federal debt had decreased to 55 percent of GDP, state debt was essentially level at 5.3 percent of GDP and local debt declined modestly to 8.8 percent of GDP. In the 2000s debt started to climb again, with federal debt reaching 62 percent of GDP by 2007. State debt was 6.5 percent of GDP and local debt was 10.2 percent of GDP in 2007.

Chart Key:
- Federal debt
- Local debt
- State debt

Then came the Crash of 2008. By 2011 federal debt had exploded to 95 percent of GDP, state debt stood at 7.3 percent of GDP and local debt increased modestly to 11.5 percent of GDP.

As of FY 2023 federal debt stands at 119.5 percent of GDP. As of 2022 state debt was 4.3 percent of GDP. As of 2021 local debt is was 5.1 percent of GDP.

Gross vs. Net Debt

The difference between gross and net is the amount of debt held in federal government trust funds.

As reported by the federal government in Historical Table 7.1 of the federal budget, the gross debt of the general government is composed of three items: debt held by the Federal Reserve System and therefore monetized, debt owed to government agencies (e.g., Social Security), and debt held by the public, including foreign governments.

In 1990, the Federal Reserve System held debt amounting to 3.9 percent of GDP. Federal debt held by the federal government amounted to 13.3 percent of GDP and debt held by the public amounted to 36.4 percent of GDP.

Chart Key:
- Debt held by public
- Debt held by federal gov.
- Debt held by Federal Reserve

Federal debt monetized by the Federal Reserve System increased to over 5 percent of GDP in 1998 and slowly increased, reaching 5.7 percent of GDP before declining in 2008 to 3.4 percent of GDP. In 2009, after the Crash of 2008, the debt held by the Federal Reserve System had increased back to 5.5 percent, and then, following a policy of “quantitative easing” and “zero interest rates,” increased to 14.1 percent of GDP in 2014. It was 17.9 percent GDP at the end of FY 2023.

Federal debt held by the government, principally IOUs to the Social Security system, has climbed steadily, 15 percent of GDP in 1992, and 20 percent in 1999. Debt held by the government exceeded 25 percent of GDP in 2005 and 30 percent of GDP in 2009. Debt held by the government was 24.4 percent of GDP at the end of FY 2023.

Federal debt held by the public (excluding the Federal Reserve System) amounted to 36.4 percent of GDP in 1990. It reached 41 percent of GDP in 1992 and peaked at 42.5 percent of GDP in 1993. Debt held by the public declined to 28.2 percent of GDP by 2000 before settling at about 29 percent of GDP till 2007. with the Crash of 2008 debt held by the public started increasing sharply, reaching 59.7 percent of GDP by 2012, and hit 77.1 percent GDP at the end of FY 2023.

Recent Interest Payments

The burden of interest rates has declined in recent decades. Running at a little under 4 percent of GDP in the mid 1980s, the cost of interest payments, federal, state, and local, began an historic decline that extended throughout the boom of the late 1990s and the recession of 2000-01. The cost of interest payments increased in the recovery of the mid 2000s, then declined below 2 percent of GDP after the Crash of 2008. In 2023 total interest payments were estimated at 2.7 percent of GDP.

Interest payments as a percent of GDP are expected to increase in the future, as the Federal Reserve unwinds the “quantitative easing” and “zero interest rate policy” it used to bolster the economy in the COVID crisis of 2020.