#29 What the 40 Trillion National Debt Actually Costs You
PODCAST #29
On the eighteenth of this month the national debt of the United States passed forty trillion dollars. Five months ago it was thirty nine trillion. Five months before that it was thirty eight. Today I am going to show you who we actually owe that money to, what the interest is costing your household every month, and why four separate attempts to stop this over the last forty years all died in Congress.
Start with where the number comes from, because on this one there is no argument about the facts.
***
The Treasury Department publishes what the government owes every single business day. It is called the daily statement and anybody can go look at it. On the eighteenth of August the gross national debt came in at forty trillion, forty seven billion dollars and change. Treasury reported it the next day.
***
Fox Business ran it. The House Budget Committee put out a statement on it. National Public Radio ran it. So did CBS, and the Associated Press, and the wire everybody else pulls from. Left, right and center, all reporting the same figure, because it is not an estimate and it is not a projection. It is a bank balance.
***
Nobody in this country disputes the number. Every single fight you will hear about it is a fight over whose fault it is.
***
So let me give you the speed of the thing, because the speed is what should worry you more than the total.
***
America crossed one trillion dollars in debt in nineteen eighty two. It took about two hundred years to get there. Two centuries. Every war, every depression, every program, all of it added up to one trillion.
***
We passed ten trillion in two thousand eight. Thirty trillion in twenty twenty two. Thirty five trillion in the summer of twenty twenty four. Thirty seven trillion a year later. Thirty eight trillion that October. Thirty nine trillion this past March. Forty trillion last week.
***
Read those last four again. We are now adding a trillion dollars of debt about every five months. The thing that took two hundred years the first time now takes about a hundred and fifty days.
***
And this one showed up early. The Congressional Budget Office, which is the nonpartisan outfit that does the math for Congress, did not expect us to hit forty trillion until next year. We beat their estimate by months. Part of the reason is that the Supreme Court threw out a batch of the president's tariffs, and the Treasury has had to refund more than a hundred billion dollars in import taxes that were collected under authority the court said did not exist. That money came in, got counted, and then had to go back out.
***
The word trillion gets thrown around now like it means something ordinary. It does not.
***
Take it in seconds. A million seconds is about eleven and a half days. A billion seconds is about thirty one and a half years. A trillion seconds is roughly thirty one thousand seven hundred years. That is not a bigger version of the same thing. That is a different universe. And we owe forty of them.
***
Here is another way to see the speed. Maya MacGuineas, who runs the Committee for a Responsible Federal Budget and has been sounding this alarm under presidents of both parties, put it this way. The gross debt has doubled in the last ten years, and in less than twenty years it has quadrupled. Her line about it was that it is staggering how predictable the fiscal decline of a global power can become.
***
Predictable is the word I would underline there. Nobody got ambushed by this. Every one of these milestones was forecast years in advance by the government's own accountants, announced in a press release when it arrived, covered for a day, and then forgotten until the next one.
***
Now let me clear up one thing you will hear people argue about on television, because it gets used to make the number sound smaller than it is.
***
There are two ways to count this debt. The gross debt is the whole forty trillion. Inside that, about thirty two trillion is what they call debt held by the public. That is money borrowed from real lenders. Pension funds, banks, insurance companies, foreign governments, and regular Americans holding savings bonds. The other eight trillion or so is money the government owes itself, mostly to the Social Security and Medicare trust funds.
***
You will hear somebody say that second part does not really count because it is just one pocket owing another pocket. Be careful with that one. Those trust funds are not a filing cabinet. They hold the money that pays somebody's mother her check every month. When the trust fund cashes in what it is owed, the Treasury has to go borrow from real lenders to pay it. So it turns into public debt anyway. It is not fake. It is just later.
***
Here is the piece of this that I think should have led every newscast in the country and got maybe a sentence.
***
Back in March, the debt held by the public passed the size of the entire American economy. Everything this country produces in a year, every car, every crop, every haircut, every hour of labor, and we owe more than all of it. That has not happened since the nineteen forties, when we were paying off the Second World War. The all time record was a hundred and six percent of the economy, set in nineteen forty six, and we are on track to break it.
***
In nineteen forty six we had just fought the largest war in human history on two oceans at the same time. That is what it took to run up a debt like this. We did it this time in peacetime, with the economy running fine.
***
It is worth asking who we actually owe this to, because people picture China holding all of it and that is not right. The largest share of the publicly held debt sits with American institutions and American households. Pension funds. Insurance companies. Banks. Mutual funds. State and local governments. Retirees holding Treasury bonds because they are supposed to be the safest thing on earth. Foreign governments hold a real slice of it and Japan and China are the biggest of those, but they are not the landlord people imagine.
***
That matters for a reason that is not comforting. It means when confidence in this debt slips, it does not just annoy a foreign capital. It moves the value of the safest asset in every retirement account in this country.
***
And when Arrington marked the thirty nine trillion milestone back in March, he put it in terms of a kid. Every child in America today carries a share of this somewhere around five hundred thirty thousand dollars. Now that is a share of gross debt divided by children, which is a rhetorical way to count it and I will say so. But it lands, because that child never voted for a dime of it.
***
The yearly math is not complicated either. The federal government takes in around five trillion dollars a year and spends around seven trillion. That gap, roughly two trillion dollars a year, is borrowed. In the first ten months of this fiscal year alone the Treasury borrowed one point eight trillion.
***
The Republican chairman of the House Budget Committee, Jodey Arrington of Texas, put it in a way that sticks with you. The federal government borrows about six billion dollars a day. And more than half of that daily borrowing is just interest on debt we already have.
***
More than half. Of every dollar we borrow today, over fifty cents is being borrowed to pay the finance charge on yesterday.
***
Where the money actually goes is the part most people guess wrong, and the guessing is what keeps us stuck.
***
Roughly two thirds of federal spending goes to four things. Social Security. Medicare. Medicaid and the related health programs. And interest. Depending on the source and on what gets counted as automatic, you will see that figure run as high as three quarters. Defense is the largest single item in what is left. Everything else the federal government does, every agency, every park, every court, every road grant, every dollar of medical research, the entire federal workforce, all of it fits in the slice after that.
***
Foreign aid, which is the thing people name first when you ask them what to cut, is under one percent. You could take it to zero tomorrow and this year's deficit would still be roughly two trillion dollars. I am not saying do not look at it. I am saying anybody who tells you foreign aid is the answer either does not know the numbers or is counting on you not knowing them.
***
And then there is the debt ceiling, which deserves about thirty seconds because of how badly it is misunderstood.
***
The debt ceiling is a legal cap on how much the Treasury is allowed to borrow. Raising it does not authorize any new spending. Not a dime. It authorizes paying for spending Congress already voted for and already signed into law. It is not deciding whether to order the meal. It is deciding whether to pay the check after you already ate.
***
That is why the debt ceiling fight is theater. Every couple of years both sides go to the brink, the markets get scared, somebody gives a speech about fiscal responsibility, and then they raise it, because the alternative is defaulting on debts we already owe. And in all those decades of brinkmanship, not one of those fights has ever produced a plan that actually changed the trajectory. What they have produced is something else, and I will get to it in a minute.
***
And the forecast is worse than the history. The Peterson Foundation, which is nonpartisan and has been yelling about this for twenty years, figures we hit fifty trillion in about six years if nothing changes. The Congressional Budget Office running a similar growth rate gets to about the same place by twenty thirty.
***
So that is the picture. A number nobody argues with, moving faster than anybody predicted.
Now let me tell you what that debt is actually costing you, because the total is abstract and the interest bill is not.
***
Net interest on the federal debt came in around a trillion dollars a year. That is roughly fourteen cents out of every dollar the federal government spends, and by some measures close to one dollar in five of everything you send to Washington.
***
Chairman Arrington says it plainly. We now spend more servicing this debt than we spend on the entire national defense of the United States.
***
Every ship, every plane, every base, every soldier's paycheck, the whole Department of Defense. The finance charge is bigger.
***
Interest is different from every other line in that budget. Every other dollar buys something. You may hate what it buys. You may think it is waste, and a lot of it is. But it buys something. A road gets built. A carrier gets floated. A veteran gets his surgery. Somebody's grandmother gets her check.
***
Interest buys nothing. Not one thing. It is the price of money we already spent, on things that are already gone, and it is now the fastest growing line in the whole federal budget.
***
So why did it explode? Two things happened at the same time, and that is what got us.
***
The pile got bigger, and the rate on the pile went up. For about fifteen years this country borrowed at interest rates near zero, and Washington got used to it. Debt looked cheap because it was cheap. Then rates went back up to something like normal, and here is the trap. The government does not lock in a thirty year rate on all of it the way you do on a house. It borrows short and rolls it over constantly. So when rates rise, the payment on the old debt resets too. Trillions of dollars of it, over and over.
***
That is why a debt that took decades to build turned into a trillion dollar a year payment in a couple of years.
***
This reaches your kitchen table, and that part almost never gets explained.
***
When Washington borrows two trillion dollars a year, it is standing in the same line you are standing in. There is only so much money in the world looking for a place to go. The government is the biggest borrower in that line and it never gets turned down, so everybody behind it pays more. The economists call it crowding out. In plain English it means your mortgage rate, your car loan, your credit card and your small business loan all have to compete with the United States Treasury.
***
The Bipartisan Policy Center made exactly this point last week. Lenders look at the size of this thing and demand a higher return to keep holding it, and that higher return works its way into everything you finance.
***
They added a piece that ties back to the last episode. Right now the technology companies are going to the capital markets for enormous sums to build out artificial intelligence and the data centers that run it. So you have the federal government borrowing two trillion a year, and the biggest companies on earth borrowing hundreds of billions on top of it, and all of that money is coming out of the same pool that funds your mortgage.
***
That is not a talking point. That is arithmetic, and it is why your house payment and a data center in the next county are connected whether anybody wants them to be.
***
And it is not slowing down. Net interest spending has gone up more than a hundred and fifty percent since twenty nineteen. Not fifteen percent. A hundred and fifty. In six years.
***
Margaret Spellings at the Bipartisan Policy Center said this month that our current path is plainly unsustainable, and that even in the rosiest version we are speeding toward a cliff and refusing to turn the wheel. She served as a Republican cabinet secretary. This is not a partisan warning.
***
And think about what a trillion dollars a year would otherwise cover. It is more than Medicare pays out for seniors in a year. It is many times what the federal government spends on every road, bridge, airport and port in the country combined. That is the size of the check we write every year for nothing.
***
Now let me show you the receipt on all of this, because this is not just people yelling. The three organizations whose entire job is to judge whether America pays its bills have all officially marked us down.
***
Standard and Poor’s went first, in August of two thousand eleven, right after a debt ceiling standoff that took the country to the edge of default. They cut the United States from the top rating for the first time in history. They said the fight itself showed that American policymaking had become less stable, less effective and less predictable. The debt at that time was about fourteen point seven trillion dollars.
***
Fitch went second, in August of twenty twenty three, after another debt ceiling crisis. They cited fiscal deterioration, a high and rising debt burden, and what they called an erosion of governance. The debt by then was thirty three trillion.
***
And Moody’s went last, in May of last year. That one is the one that should have stopped the room. Moody’s had rated this country at the highest possible level since nineteen seventeen. More than a hundred years. Through the Depression. Through two world wars. Through Vietnam, through stagflation, through the financial crisis. They held the line through all of it, and last year they let go.
***
Their reason, in their own language, was that successive administrations and successive Congresses have failed to agree on measures to reverse the trend of large deficits and growing interest costs, and that they do not believe the proposals currently on the table will change it.
***
That is the least partisan sentence in this whole episode. Successive administrations. Successive Congresses. Plural, both parties, over decades, all named in the same breath by people whose job is arithmetic and not politics.
***
So now, for the first time in over a century, the United States of America does not hold a perfect credit rating from a single one of the three agencies.
***
Now, I will give you the fair pushback on this, because it exists. The markets barely blinked at any of the three. Treasury bonds are still the thing the world runs to when it gets scared, and after the twenty eleven downgrade the rate we pay actually went down, because everybody piled into Treasuries out of fear. So you can argue the ratings are symbolic.
***
But look at what those agencies said instead of what the market did that week. All three of them, over fourteen years, gave the same reason. Not a recession. Not a war. Not a market panic. They said the political system cannot make a decision. That is the finding. Three separate juries, same verdict.
***
There are two arguments about what is driving the spending, and both of them belong here.
***
The argument on the right is that this is a spending problem. Federal outlays are up roughly sixty percent since twenty nineteen. The programs that run on autopilot take up the large majority of the budget and grow every year without anybody voting on them. More people are retiring, they live longer, health care costs more, and nobody in Washington has touched the structure of any of it in forty years.
***
The argument on the left is that this is a revenue problem. Revenue is at a record in raw dollars but has not kept pace with what we have promised, tax cuts across multiple administrations reduced what comes in, and the tariff refunds just took another hundred billion back out the door.
***
Here is the honest answer. They are both describing the same hole from opposite sides. You are taking in five and spending seven. You can argue all day about whether the problem is the five or the seven. The gap is two trillion dollars either way and it does not care who is right.
***
There is one more thing the interest does, and it is quiet. It squeezes everything Congress actually votes on. The part of the budget that funds veterans hospitals, the roads, the national parks, medical research, the border, the courts, all of it comes out of a slice that is shrinking as a share of the whole, because interest and the big automatic programs keep eating more of the plate. So every year the fight over that shrinking slice gets nastier, and every year it matters less to the total.
***
There is a strong argument against everything I just said, and it is not stupid.
***
The counterargument goes like this. America is not Greece. We borrow in our own currency, which we control. The demand for United States Treasury bonds is the deepest and most reliable demand for any asset in the history of money. People have been predicting a debt crisis here for forty years and it has not come. And there is no magic line where the whole thing falls over.
***
Every bit of that is true. I am not going to stand here and tell you the sky falls on a particular Tuesday, because nobody knows that and the people who claim they do have been wrong for decades.
***
But that argument concedes something. It does not say the debt is harmless. It says the collapse is not imminent. Those are different claims. The interest bill is not a prediction, it is a bill, and it is being paid right now out of money that could have gone somewhere else. You do not need a crisis for that to cost you. You are already paying for it in what your government cannot afford to do and in what it costs you to borrow.
***
There is one more thing coming and it is on a clock.
***
The Social Security Administration's own trustees expect the retirement trust fund to run out around twenty thirty two. Medicare's hospital fund is expected to follow the year after.
***
Running out does not mean checks stop. What it means is that once the fund is empty, the program can only pay out what the payroll tax brings in that year, which is somewhere in the neighborhood of three quarters of what has been promised. That is an automatic cut, written into current law, showing up in about six years, unless Congress acts.
***
Six years. And I would ask you to hold that up next to what you know about how fast Congress moves.
***
A trillion dollars a year that buys nothing, in a budget where the biggest programs are on a countdown clock.
So the last question is the only one that matters. Why does nobody fix it?
***
And I do not mean that as a complaint. I mean it as a mechanical question. What is it about this town that makes forty trillion dollars possible? Because it is not one bad president and it is not one bad Congress. This took fifty years and it took everybody.
***
Start with the process, because the process is where it hides.
***
Congress is supposed to do a specific job every year. Pass a budget blueprint, then pass twelve separate spending bills, one for each part of the government, and have them all signed before the new fiscal year starts on the first of October. That is the law. It has been the law since nineteen seventy four.
***
Since that system took effect, Congress has done that job on time four times. Nineteen seventy seven. Nineteen eighty nine. Nineteen ninety five. And nineteen ninety seven, which got finished on the thirtieth of September, nineteen ninety six, one day before the deadline.
***
Four times in about fifty years. That is a success rate under ten percent, and that is not a partisan statistic, it comes from Pew and from the Government Accountability Office and from the Senate Budget Committee's own documents.
***
And it has been thirty years since the last one.
***
So what happens instead? Continuing resolutions. A continuing resolution just says keep spending at last year's levels for a while longer. It is the government equivalent of hitting snooze. Nobody has to vote on whether a program is working. Nobody has to defend a single line. Everything from last year rolls forward automatically, including the parts everybody agrees are garbage, and the parts that actually needed more money do not get it either.
***
And this is not an occasional thing. Between nineteen ninety eight and twenty seventeen, Congress passed a hundred and nine continuing resolutions. At least one every single year. In one year alone it took twenty one of them. Twenty one separate votes to keep the lights on because they could not finish the actual work.
***
In thirteen of the past fifteen fiscal years, lawmakers did not pass a single one of their twelve spending bills by the first of October. Not one.
***
This past fiscal year is a perfect example. The year started on the first of October with no bills passed and the government shut down. It stayed shut into November. The House did not finish passing all twelve of its bills until January, months into the year it was supposedly funding.
***
Now put that together with the size of the budget. The automatic programs and the interest never go through those twelve bills at all. They just run.
***
So you have a Congress that cannot manage the quarter of the budget it actually votes on, and does not vote at all on the three quarters that is growing fastest.
***
You cannot cut what you never voted on. And they have arranged it so they never have to vote on it.
***
And there is no mystery about how to fix the process itself. Serious people have been putting proposals on the table for twenty years. Move to a two year budget cycle so there is time to actually do it. Require the House and Senate to stay in session and do nothing else until the spending bills are done. Stop paying members when the bills are late. None of that is radical and none of it has passed, because the broken process is useful to the people it embarrasses. A continuing resolution lets four hundred and thirty five members avoid a single hard vote and go home.
***
There is a version of this story where people say nobody has ever tried. That is not true. They have tried, over and over, and watching how each attempt died tells you more than any speech will.
***
In nineteen eighty five, Congress passed a law with automatic spending cuts that would trigger if deficit targets were missed. It was called Gramm Rudman Hollings. The Supreme Court struck down the key enforcement mechanism the very next year, and what was left got waived and rewritten until it meant nothing.
***
In nineteen ninety they tried again, with spending caps and a rule that said any new spending or any tax cut had to be paid for. That one actually worked for a while. Combined with a strong economy and a divided government where a Democratic president and a Republican Congress needed each other, this country ran four straight budget surpluses, in nineteen ninety eight, ninety nine, two thousand and two thousand one.
***
Four surpluses. In fifty years, that is all of them, and they happened when both parties were forced to negotiate and there were enforceable rules on the books.
***
Then the rules were allowed to expire, and here we are. That is the most important fact in this entire episode, and you almost never hear it. It has been done. In living memory. By people no smarter than the ones in there now. It is not impossible. It is just unpleasant.
***
In two thousand ten a bipartisan commission, run by a Republican former senator and a Democratic former chief of staff, spent a year building an actual plan. Spending cuts and tax reform together, everything on the table. They needed fourteen of eighteen votes to send it to Congress. They got eleven. Members of both parties walked away from their own commission, and the report went on a shelf where it sits today.
***
In twenty eleven, out of the debt ceiling standoff, we got the Budget Control Act, with automatic across the board cuts designed to be so stupid and so painful that Congress would be forced to find something better. Congress did not find something better. It simply voted, again and again, to raise the caps it had set for itself.
***
So the pattern is forty years old. Make a rule. Break the rule. Waive the rule. Let the rule expire. Appoint a commission. Ignore the commission.
***
Now the politics, and this is the honest part that nobody says out loud on a campaign stage.
***
The math on this is not hard. There are only three levers. Cut the big programs. Raise taxes. Or grow the economy fast enough to outrun it. That is the entire list.
***
Lever one is Social Security and Medicare, and both parties have figured out that touching those is the fastest way to lose an election in this country. Seniors vote. They vote in every election, including the quiet ones, and they will end your career over it. So both parties promise not to touch it, and every year the promise gets more expensive.
***
Lever two is taxes. One party will not raise them. The other will raise them on a small number of people, which raises real money but nothing close to two trillion a year. And nobody in either party will walk up to a middle class family in an election year and say we need more from you.
***
Lever three is growth, and this is the administration's answer. The White House says it is focused on cutting waste and fraud and abuse in federal spending while growing the economy fast enough to bring the debt down compared to the size of the economy. And I will say this. Growth genuinely helps. It is the least painful lever there is and it should be the first one you pull.
***
But be honest about the size of what you are asking growth to do. We have had a decent economy for a while now, and the hole still got two trillion dollars deeper this year. Waste and fraud are real and they should be hunted down, but there is no plausible amount of waste in the discretionary budget that adds up to two trillion dollars a year. The money is in the big programs and the interest, and everybody in that building knows it.
***
So all three levers are politically radioactive, and the beautiful part, if you are a member of Congress, is that nothing bad happens to you personally for ignoring it. The bill does not come due on your watch. It comes due on somebody else's, and by then you have a book deal.
***
Here is how far this has gone. Jodey Arrington, the Republican who chairs the House Budget Committee, the man whose actual job is the federal budget, is now calling for an Article Five convention. That is the provision in the Constitution that lets the states go around Congress entirely and propose amendments themselves. He wants a balanced budget amendment.
***
The chairman of the Budget Committee has concluded that the institution he chairs is not capable of doing this, and the only way out is to have the states force it.
***
There is a real conservative argument against that. Plenty of people on the right have warned for years that once you open a convention, there is no guarantee it stays limited to the one thing you called it for. That is a legitimate fear and it is not crazy. But notice where we are. We are debating whether to invoke a constitutional mechanism this country has never once used, because the normal one stopped functioning.
***
One thing could change the behavior. Nothing in that town moves until the people back home make it move. Every single time this country has actually gotten its books in order, it was because voters made it a condition of the job. In the nineties, deficit reduction was a live political issue that people voted on. A third party candidate ran on it and pulled nineteen percent of the vote in nineteen ninety two, and both parties got the message immediately. That is what produced the caps, and the caps produced the surpluses.
***
It went away as an issue because for fifteen years borrowing was almost free and nobody felt it. Now interest is a trillion dollars a year and people are starting to feel it in what they pay for a house and a car. Which means, for the first time in a generation, this is a thing you could actually vote on again.
***
So what do you actually do with this.
***
You stop accepting the speech. Every one of them, both parties, will tell you they are serious about the debt. Fine. Then make them answer two questions. Name one specific program you would cut. And name one specific tax you would raise or one specific benefit you would means test. Not waste, fraud and abuse. Not foreign aid, which is less than one percent of it. A real line, with a real name, out of their own mouth.
***
Anybody who cannot answer both of those is not serious, and I do not care which letter is after their name.
***
And watch the continuing resolutions. Every time you hear that Congress passed another one, understand what just happened. They did not make a decision. They agreed not to make one, and they will do it again in a few months.
***
Forty trillion dollars. Two hundred years for the first trillion, and about five months for the last one. In peacetime, with a working economy, with a record amount of money coming in the door.
***
Both parties built this. Neither one will own it. And the interest bill is now bigger than the entire United States military.
AND THAT'S IT.
That is everyone knows. The hard truth, the stuff nobody else will say, and the thing that keeps you going.
***
I am Brian Bullock of starborn studios. Find me on X at Everyoneknows1. If this hits you share it with someone who needs to hear it. Subscribe. leave a review. Come find us at brianbullockwriter.com
***
Because everyone knows. Your silence is your consent