4 Ways the United States Got to $40 Trillion in National Debt
The U.S. national gross debt just hit $40 trillion — an unfortunate milestone reached at an alarming pace. The national debt has been climbing by $1 trillion every five months since 2020 and has doubled since 2017. That is a stark difference from the beginning of the 21st century, when gross debt sat at $5.7 trillion. Back then, the United States ran a budget surplus and was on track to effectively eliminate the debt by 2009. How did the United States get here? Below are the four key fiscal trends over the last 25 years that have put the nation’s debt on a dangerous trajectory.
1. Tax Cuts
Seven rounds of major tax cuts and extensions since the early 2000s are a big part of America’s rapid debt accumulation. Major tax legislation, including the 2001 and 2003 “Bush tax cuts,” the Tax Cuts and Jobs Act of 2017, and the recent One Big Beautiful Bill Act, reduced federal revenues by an estimated $8.7 trillion through 2026. That represents approximately 30 percent of the debt held by the public (DHBP) to gross domestic product (GDP) increase since 2001.
2. Spending Increases
Growth in spending — including the wars in Iraq and Afghanistan and an expansion of Medicare benefits — added an estimated $7.6 trillion to the debt since 2001, or approximately 26 percent of debt increases over that timeframe, according to the Committee for a Responsible Federal Budget.
3. Recession Responses
The 2008 financial crisis and the COVID-19 pandemic each triggered large-scale federal intervention — from the Troubled Asset Relief Program (TARP) and the 2009 stimulus to pandemic stimulus spending, expanded unemployment, and business loans. Combined, these responses added an estimated $6.8 trillion to the debt, or 24 percent of the DHBP-to-GDP increase.
4. Structural Entitlement Growth and Interest
Over the last quarter century, Social Security, Medicare, and Medicaid have continued to grow, driven by an aging population and high healthcare costs. Growth in the three largest entitlement programs — combined with accelerated interest payments — is the fourth major contributor to our debt trajectory since 2000. And while this category represents a structural gap that predates any recent single law, it has an enormous impact on our fiscal outlook that we need to address in the future, as entitlement programs and net interest costs are on pace to continue to grow faster than the rest of the budget in the years ahead.
Conclusion
Together, these four forces — tax cuts, spending growth, crisis response, and structural growth of entitlements and interest — explain much of the now $40 trillion national debt. None of them alone is the "cause"; rather, they reflect the accumulation of policy choices that have resulted in a truly dangerous debt path for the future. The good news is that this problem is solvable, with many solutions available to stabilize the national debt, support economic growth, and enhance prosperity and opportunity for Americans.
Photo by Anna Moneymaker/Getty Images
Further Reading
The Federal Government Has Borrowed Trillions. Who Owns All that Debt?
Most federal debt is owed to domestic holders, but foreign ownership is much higher now than it was about 50 years ago.
With $40 Trillion in Debt, Is the U.S. Headed for More Credit Downgrades?
Three successive downgrades of the U.S. credit rating should alarm elected leaders, but our national debt remains on an unsustainable trajectory.
The United States Is Adding to the National Debt Faster Than Ever
The nation’s debt is growing at a historic rate and eclipsing all-time highs.