Understanding the National Debt

What Is the National Debt?

The national debt is the total amount of money the U.S. government owes to its creditors. As of 2026, it stands at over $36 trillion.

Two Types of Debt

Public debt (~$28.5 trillion): Money owed to outside investors — individuals, corporations, foreign governments, the Federal Reserve, and others. This is debt the government pays interest on to external holders.

Intragovernmental debt (~$7.8 trillion): Money the government owes to itself — specifically to federal trust funds like Social Security and military retirement. When these trust funds have surpluses, they buy Treasury securities.

Who Holds the Debt?

• Foreign governments: 22% (Japan and China are the largest holders)
• Federal Reserve: 13%
• Mutual funds: 9%
• State & local governments: 4%
• Banks: 4%
• Social Security & other trust funds: 21%
• Other: 27%

Why Does It Matter?

1. Interest payments: The government now spends nearly $1 trillion per year just on interest — more than it spends on defense

2. Future generations: Today's debt will need to be serviced by tomorrow's taxpayers

3. Economic flexibility: High debt can limit the government's ability to respond to crises

4. Debt-to-GDP ratio: At 123%, the U.S. debt-to-GDP ratio is at historically high levels

Is This Sustainable?

Economists disagree. Some argue that as long as the economy grows faster than interest rates, the debt is manageable. Others warn that rising interest rates and demographic pressures (aging population) make the current trajectory unsustainable.