Debt
Charting America’s Debt: $27 Trillion and Counting
Why America’s Debt Doesn’t Stop Growing
Public sector debt has been a contentious topic for many years. While some believe that excessive government borrowing can be harmful over the long term, others have argued that it acts as a powerful tool for stimulating growth.
In the U.S., the latter view appears to have taken hold. Since 2008, America’s national debt has surged nearly 200%, reaching $27 trillion as of October 2020. To gain a better understanding of this ever-growing debt, this infographic takes a closer look at various U.S. budgetary datasets including the 2019 fiscal balance.
America’s Debt vs. GDP
Government debts are often represented by incredibly large numbers, making them hard to comprehend. By comparing America’s debt to its annual GDP, we can get a better grasp on the relative size of the country’s financial obligations.
Year | Total Public Debt (USD) | GDP (USD) | Debt as % of GDP |
---|---|---|---|
1994 | $4.5T | $7.1T | 63% |
1995 | $4.8T | $7.5T | 64% |
1996 | $5.0T | $7.9T | 63% |
1997 | $5.3T | $8.4T | 63% |
1998 | $5.5T | $8.9T | 62% |
1999 | $5.6T | $9.4T | 60% |
2000 | $5.8T | $10.0T | 58% |
2001 | $5.7T | $10.5T | 54% |
2002 | $5.9T | $10.8T | 55% |
2003 | $6.4T | $11.2T | 57% |
2004 | $7.0T | $11.9T | 59% |
2005 | $7.6T | $12.8T | 59% |
2006 | $8.2T | $13.6T | 60% |
2007 | $8.7T | $14.2T | 61% |
2008 | $9.2T | $14.7T | 63% |
2009 | $10.6T | $14.4T | 74% |
2010 | $12.3T | $14.7T | 84% |
2011 | $14.0T | $15.3T | 92% |
2012 | $15.2T | $16.0T | 95% |
2013 | $16.4T | $16.6T | 99% |
2014 | $17.3T | $17.1T | 101% |
2015 | $18.1T | $18.0T | 101% |
2016 | $18.9T | $18.5T | 102% |
2017 | $19.9T | $19.2T | 104% |
2018 | $20.5T | $20.2T | 101% |
2019 | $21.9T | $21.1T | 104% |
2020 | $23.2T | $21.6T | 107% |
April 2020 | $23.7T | $19.5T | 122% |
Source: Federal Reserve, U.S. Treasury
In this context, U.S. debt was relatively moderate between 1994 to 2007, averaging 60% of GDP over the timeframe. This took a drastic turn during the Global Financial Crisis, with debt climbing to 95% of GDP by 2012.
Since then, America’s debt has only increased in relative size. In April 2020, with the COVID-19 pandemic in full force, it reached a record 122% of GDP. This may sound troubling at first, but there are a few caveats.
For starters, there are many other advanced economies that have also surpassed the 100% debt-to-GDP milestone. The most noteworthy is Japan, where the debt-to-GDP ratio has climbed beyond 200%. Furthermore, this is not the first time America has found itself in this situation—by the end of World War II, debt-to-GDP peaked at 106% before declining to historic lows in the 1970s.
What’s Preventing the Debt From Shrinking?
Although the U.S. continuously pays off portions of its debt, the total amount it owes has increased each year since 2001. That’s because the federal government runs consistent budget deficits, meaning it spends more than it earns. During economic crises, these deficits can become incredibly large.
Fiscal Year (Sept 30) | Budget Surplus or Deficit (USD billions) |
---|---|
2000 | +$236B |
2001 | +$128B |
2002 | -$158B |
2003 | -$378B |
2004 | -$418B |
2005 | -$318B |
2006 | -$248B |
2007 | -$161B |
2008 | -$458B |
2009 | -$1,412B |
2010 | -$1,294B |
2011 | -$1,299B |
2012 | -$1,076B |
2013 | -$680B |
2014 | -$485B |
2015 | -$441B |
2016 | -$585B |
2017 | -$665B |
2018 | -$779B |
2019 | -$984B |
2020 | -$3,131B |
Source: Federal Reserve
In the aftermath of the Global Financial Crisis, the U.S. recorded an annual deficit of $1.4 trillion in FY2009. This was largely due to the $787 billion American Recovery and Reinvestment Act of 2009, which provided tax rebates and other economic relief.
In the economic battle against COVID-19’s impacts, the boundaries have been pushed even further. The annual deficit for FY2020 weighs in at a staggering $3.1 trillion, the largest ever. Contributing to this historic deficit was the $2 trillion CARES Act, which provided wide-ranging support to the entire U.S. economy.
Breaking Down the 2019 Fiscal Balance
Even in the years between these two economic crises, government spending still outpaced revenues. To find out more, we’ve broken down the 2019 fiscal balance into its various components.
Federal Spending
Total spending in FY2019 was roughly $4.4 trillion, and can be broken out into three components.
The first component is Mandatory Spending, which accounted for 62% of the total. Mandatory spending is required by law, and includes funding for important programs such as social security.
Category | Amount (USD billions) | Percent of Total Federal Spending |
---|---|---|
Health programs | $1,121B | 25.5% |
Social security | $1,039B | 23.6% |
Income security | $301B | 6.8% |
Federal civilian and military retirement | $164B | 3.7% |
Other | $109B | 2.5% |
Total mandatory spending | $2,735B | 62.2% |
Figures may not add to 100 due to rounding. Source: Peter G. Peterson Foundation
The largest category here was Health, with $1.1 trillion in funding for programs such as Medicare and Medicaid. Social security, which provides payments to retirees, was the second largest at $1.0 trillion.
The second component is Discretionary Spending, which accounted for 30% of the total. Discretionary spending is determined on an annual basis by Congress and the President.
Discretionary Spending | Amount (USD) | Share of Total Federal Spending |
---|---|---|
Defense | $677B | 15.4% |
Transportation | $100B | 2.3% |
Veteran's benefits & services | $85B | 1.9% |
Education | $72B | 1.6% |
Health | $66B | 1.5% |
Administration of justice | $59B | 1.3% |
International affairs | $52B | 1.2% |
General government | $51B | 1.2% |
Housing assistance | $49B | 1.1% |
Natural resources and environment | $44B | 1.0% |
General science, space, and technology | $32B | 0.7% |
Community and regional development | $27B | 0.6% |
Training, employment, and social services | $23B | 0.5% |
Total discretionary spending | $1,338B | 30.4% |
Figures may not add to 100 due to rounding. Source: Peter G. Peterson Foundation
At $677 billion, the Defense category represents over half of total discretionary spending. These funds are spread across the five branches of the U.S. military: the Army, Marine Corps, Navy, Air Force, and Space Force.
The third component of spending is the net interest costs on existing government debt. For FY2019, this was approximately $327 billion.
Federal Revenues
Revenues in FY2019 fell short of total spending, coming in at approximately $3.5 trillion. These inflows can be traced back to six categories.
Category | Amount (USD billions) | Percent of Total Revenues |
---|---|---|
Individual income taxes | $1,732B | 50.0% |
Payroll taxes | $1,247B | 36.0% |
Corporate income taxes | $242B | 7.0% |
Other | $104B | 3.0% |
Excise taxes | $104B | 3.0% |
Customs duties | $69B | 2.0% |
Total revenues | $3,464B | 100.0% |
Figures may not add to 100 due to rounding. Source: Peter G. Peterson Foundation
Revenues overwhelmingly relied on individual income and payroll taxes, which together, accounted for 86% of the total. Corporate income taxes, on the other hand, accounted for just 7%.
Is America’s Debt a Cause for Concern?
The general consensus following the events of 2008 is that large fiscal stimulus (supported by government borrowing) was effective in speeding up the consequent recovery.
Now facing a pandemic, it’s likely that many Americans would support the idea of running large deficits to boost the economy. Surveys released in July 2020, for example, found that 82% of Americans wanted federal relief measures to be extended.
Looking beyond COVID-19, however, does reveal some warning signs. One frequent criticism of the ever-growing national debt is its associated interest costs, which could cannibalize investment in other areas. In fact, the effects of this dilemma are already becoming apparent. Over the past decade, the U.S. has spent more on interest than it has on programs such as veterans benefits and education.
With low interest rates expected for the foreseeable future, the federal government is likely to continue running its large annual deficits—at least until the effects of COVID-19 have fully subsided. Perhaps after this crisis is over, it will be time to assess the long-term sustainability of America’s rising national debt.
Markets
Visualized: U.S. Corporate Bankruptcies On the Rise
In 2023, over 400 companies have folded. This graphic shows how corporate bankruptcies are growing at the second-fastest rate since 2010.

Visualized: U.S. Corporate Bankruptcies on the Rise
In March, Silicon Valley Bank collapsed, plunging its parent company SVB Financial Group into bankruptcy a week later.
While many expected a wave of bank failures to follow, much of this has since been averted—but cracks have begun to emerge with Moody’s recent downgrading of 10 small and mid-sized banks.
Across the wider corporate landscape, bankruptcies have begun to tick higher. Overstretched balance sheets coupled with 11 interest rate hikes since last year have added to mounting challenges for companies across many sectors.
This graphic shows the surge in corporate bankruptcies in 2023 based on data from S&P Global.
U.S. Corporate Bankruptcies Grow
So far in 2023, over 400 corporations have gone under. Corporate bankruptcies are rising at the fastest pace since 2010 (barring the pandemic), and are double the level seen this time last year.
Below, we show trends in corporate casualties with data as of July 31, 2023:
Year of Filing | Bankruptcy Filings as of July | Annual Total |
---|---|---|
2023 | 402 | N/A |
2022 | 205 | 373 |
2021 | 256 | 408 |
2020 | 407 | 639 |
2019 | 334 | 590 |
2018 | 317 | 518 |
2017 | 305 | 520 |
2016 | 354 | 576 |
2015 | 292 | 525 |
2014 | 273 | 471 |
2013 | 349 | 558 |
2012 | 362 | 586 |
2011 | 364 | 634 |
2010 | 530 | 827 |
Represents public or private companies with public debt where either assets or liabilities are greater than or equal to $2 million, or private companies where assets or liabilities are greater than or equal to $10 million at time of bankruptcy.
Firms in the consumer discretionary and industrial sectors have seen the most bankruptcies, based on available data. Historically, both sectors carry significant debt on their balance sheets compared to other sectors, putting them at higher risk in a rising rate environment.
Overall, U.S. corporate interest costs have increased 22% annually compared to the first quarter of 2021. These additional costs, combined with higher wages, energy, and materials, among others, mean that companies may be under greater pressure to cut costs, restructure their debt, or in the worst case, fold.
Billion-Dollar Bankruptcies
This year, 16 companies with over $1 billion in liabilities have filed for bankruptcy. Among the most notable are retail chain Bed Bath & Beyond and the parent company of Silicon Valley Bank.
Company | Primary Sector | Date |
---|---|---|
Party City | Consumer Discretionary | Jan 2023 |
Serta Simmons Bedding | Consumer Discretionary | Jan 2023 |
Avaya | Information Technology | Feb 2023 |
Diamond Sports | Communication Services | Mar 2023 |
SVB Financial | Financials | Mar 2023 |
LTL Management | N/A | Apr 2023 |
Bed Bath & Beyond | Consumer Discretionary | Apr 2023 |
Whittaker, Clark & Daniels | N/A | Apr 2023 |
Monitronics | Industrials | May 2023 |
Kidde-Fenwal | Consumer Discretionary | May 2023 |
Envision Healthcare | Healthcare | May 2023 |
Diebold | N/A | Jun 2023 |
Wesco Aircraft | Industrials | Jun 2023 |
PGX Holdings | Industrials | Jun 2023 |
Cyxtera | Information Technology | Jun 2023 |
Voyager Aviation | Industrials | Jul 2023 |
Mattress giant Serta Simmons filed for bankruptcy early this year. It once made up nearly 20% of bedding sales in America. With a vast share of debt coming due this year, the company was unable to make payments due to higher borrowing costs.
What Comes Next?
In many ways, U.S. corporations have been resilient despite the sharp rise in borrowing costs and economic uncertainty.
This can be explained in part by stronger than anticipated profits seen in 2022. While some companies have cut costs, others have hiked prices in an inflationary environment, creating buffers for rising interest payments. Still, S&P 500 earnings have begun to slow this year, falling over 5% in the second quarter compared to last year.
Secondly, the structure of corporate debt is much different than before the global financial crash. Many companies locked in fixed-rate debt over longer periods after the crisis. Today, roughly 72% of rated U.S. corporate debt has fixed rates.
At the same time, banks are getting more creative with their lending structures when companies get into trouble. There has been a record “extend and amend” activity for certain types of corporate bonds. This debt restructuring is enabling companies to keep operating.
The bad news is that corporate debt swelled during the pandemic, and eventually this debt will come due likely at much higher costs and with more severe consequences.
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