National Debt

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Some remarks on the American national debt (revised) — Jim Swift, March 21, 2026

These remarks are a revision of this earlier article. 

The federal debt is big.  But how big is too big?  At time of this writing, it's $38 trillion and change.  Is that too much?  Who knows?  The only practical way to understand it is to compare it with another number.

A popular approach is to compare it with Gross Domestic Product (GDP).  These days, the national debt is around %119 of GDP.  That seems... bad.  Actually it's worse, because it's comparing the money the federal government borrowed, with the goods & services everyone produces.  If we compare the national debt to just the revenue the federal government collects, it's more like 600%.  But is it too much?  Who knows?

Another approach is to compare it with the population of the country, which is around 343 million souls.  This is north of $111,000 for every man, woman, and child.  Got a family of four?  Your share of the national debt is $444,000.  It's not just bad... it's personal.  Again, is it too much?  Who knows?

One Number to Rule Them All

We now propose a more useful number — public debt service portion:

• The amount the federal government pays out to the public in interest every year.
• Compared with total revenue the federal government collects every year.

For example, back in fiscal year 2015, the federal government collected $3.98 trillion, but paid out $248 billion in interest on its debt, or 6.2%.

Public debt service portion is useful in that it answers the question: how big is too big?  Well, when it reaches 100%, it's definitely too big.  At that point, every dollar the federal government collects is paid out in interest.  Nothing is left over to pay the military, welfare, transportation, etc.  Basically we're done as a nation.  Mexican cartels invade from the south and take over much of the country.  They may be immoral and ruthless, but they always balance their budgets.  Canadians also invade but get bogged down in the South Side of Chicago.

Another nice feature of the public debt service number: it automatically accounts for inflation.  As inflation occurs, revenue is received in inflated dollars, but interest is also paid out in inflated dollars.  So inflation conveniently cancels out.  This makes it easy to do year over year comparisons.

The Data

Here's the historical data:

How far along the path to doom are we?  Answer: 15.5%.  The federal government is paying out a dollar for every six and a half dollars it collects.

How did we get here?  In FY 2021, public debt service portion was 7.9%.  Then interest paid on the debt more than doubled (rose 130%) over the subsequent three years, from $389 billion to $896 billion.  Normally, it rises by around 1.0% to 1.1% annually.  Over the same period, revenue increased by only 20%.

Let that sink in.  130% rise in interest vs. 20% rise in revenue.  I don't care what universe you're from — that's gotta hurt.

A major culprit: the average interest rate the government was paying increased significantly over that time.  Though it was not the case that the rate achieved extraordinary heights — in FY 2024 it was a modest 3.3%.  Rather the rate had gotten down to an extraordinarily low 1.6% back in FY 2021.  Apparently the federal government got addicted to those low rates, failed to get its fiscal house in order, and when the rate climbed back up, interest payments exploded.

In order for the average rate to climb that fast, much of the debt with low rates must have been short-term bonds.  So when they needed to be rolled over, all of a sudden that low rate became whatever the market demanded.  Of course, taking on a bunch of new debt at higher rates also contributes.  Foreseeable problems, but here we are.

What About "Intragovernmental Debt?"

There are two kinds of federal government debt.  There is debt it owes to the public, and there is debt the government owes to itself, or "intragovernmental debt."  Most of the latter comprises the Social Security Trust Fund and the Medicare Trust Fund.

In the original version of this article, we included intragovernmental interest payments.  This time around, we choose to exclude them, considering only interest payments made to the public.  Why?  As it happens, such payments show up as interest expense, but they do not show up as revenue.  That distorts our picture, which makes us sad.  Thus the exclusion.

Now one might vigorously point out that the Social Security and Medicare programs are rather important.  And indeed they are.  Yet as a practical matter, the associated trust funds are a bit fictional.  Observe how the money flows:

1. Government collects taxes.

2. Government routes designated taxes & pays "interest" into the funds.

3. Government withdraws that, and more, from the funds.

4. That "and more" part means the funds liquidate some of their bonds.

5. The funds receive the resulting principal from... the government.

6. Government pays beneficiaries.

To obtain a deeper understanding of this process, watch a finicky child who refuses to eat.  He moves food around on his plate in essentially the same manner.

Now if they took the U.S. treasury bonds (a.k.a. IOUs) held by the funds, and lit them on fire tomorrow, here is how the money would flow:

1. Government collects taxes.

2. Government pays beneficiaries.

See the difference?  Neither do we.

In any event, those trust funds have been dwindling.  Likewise, interest payments on intragovernmental debt have been declining.  In FY 2010, such payments were 49% of combined federal interest payments.  Today they are 20%.  In a few years the fiction will dissipate entirely.

Epilogue

We might ask, why keep adding to the national debt?

If one adopts the view that a key use of money by Congress and the president is the buying of votes, the debt explains itself.  They'll spend whatever money the government brings in, then borrow more and spend that too.  Even if a particular iteration of Congress was seized with a selfless regard for the national good, the next Congress would certainly say thank you very much and buy more votes with the windfall.  As long as federal revenue grows as fast as interest payments, the game can be sustained indefinitely.

However, math is a harsh mistress.  When one plays roulette with exponential curves, things can spiral out of control in a hurry.

Keep an eye on that public debt service portion — 15.5%.  This number should be the center of our national discussion on the topic.  It is the one the media should be reporting.  It is the one for which the politicians should be held to account.  It has been growing, and it has a hard limit.  For the love of Alexander Hamilton, let us not go there.

Notes

Interest payments are taken from this dataset:
Interest Expense on the Public Debt Outstanding
Category included is INTEREST EXPENSE ON PUBLIC ISSUES.
Category excluded is INTEREST EXPENSE ON GOVT ACCOUNT SERIES (a.k.a. intragovernmental payments).

Revenue is taken from this dataset:
U.S. Government Revenue Collections

Public debt service portion is calculated using the mathematical "division" operation.

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