U.S. National Debt Reaches $32 Trillion, Equaling the Economy
National debt now equals the size of the U.S. economy at $32 trillion, creating a debt-to-GDP ratio of 100% that Democrats set to take over Congress with large majorities will have to confront alongside an expensive policy agenda, Fortune reported.
Although a 100% debt-to-GDP ratio generally triggers concern internationally, it drew minimal focus during a political campaign largely centered on living costs and economic anxieties.
The federal government has spent more than it collects in taxes over the past 25 years, growing debt to these levels as lawmakers cut taxes repeatedly instead of paying down debt even as the economy grew, according to an analysis of Congressional Budget Office data by the Center for American Progress.
The series of tax cuts since 2001 has added over $10 trillion to the debt, the Center for American Progress study found. Without these cuts, the debt-to-GDP ratio would be decreasing, according to the research.
Proponents of fiscal austerity argue that lower spending should accompany tax cuts so that debt does not rise. A study by the Tax Foundation pointed out that while gross domestic product has grown, federal spending outside of crises like the 2009 recovery package and COVID-19 stimulus has stayed relatively constant, and successive tax reductions over the past 25 years have decreased in magnitude when measured relative to GDP.
According to the Tax Foundation, the 1981 tax reductions enacted by President Ronald Reagan rank as the largest in history, cutting yearly federal revenue by an average of 2.9% of GDP. The next two biggest cuts occurred in 1945 and 1948 when the government rolled back wartime hikes that helped pay for World War II.
President Barack Obama’s 2012 legislation extending most temporary George W. Bush-era tax cuts ranks fourth at 1.8% of GDP, while cuts passed under President Lyndon Johnson in 1964 rank fifth. Ranking sixth at 1.2% of GDP is President Donald Trump’s comprehensive 2025 tax and policy package, which preserved most of his 2017 tax reductions on a permanent basis.
Even though the Trump reductions represented a modest fraction of GDP, they exerted a much heavier toll on the national debt, largely driven by elevated borrowing expenses. Assuming the provisions would sunset after 2025, the initial 2017 law was anticipated to elevate public debt from 91.2% to 97.1% of GDP by 2027.
Congress was loathe to let those provisions lapse. Trump’s bill to prolong or permanently establish the 2017 tax cuts was successfully shepherded through by the slim Republican majority in 2025.
The Congressional Budget Office estimated that the 2025 bill would add another $3.4 trillion over 10 years, projecting that increasing deficits would push debt to 116% of GDP by the end of 2034.
A public policy analysis notes that while tax cuts might have a mild fiscal effect when debt is low and gross domestic product is expanding rapidly, the combination of a much higher debt-to-GDP ratio and elevated interest rates today makes incurring new debt significantly more expensive than it was a decade and a half or two decades ago.
“It remains to be seen how much leverage the results of the midterms will grant Democratic lawmakers in the next two years as they try to enact legislation under Trump,” Hinckley Jones-Sanpei, public policy researcher at the University of Denver, told Fortune.