Charting the Course of the National Debt Over the Decades

Living In Historic Times

It’s no secret that the national debt has grown a lot over the past half-century, but sometimes it’s eye-opening to just look at the numbers laid out across different eras. By pulling data from a handful of years—1970, 1980, 1990, 2000, 2010, 2020, and 2023—we can get a pretty good sense of how both the total amount owed and the size of the economy (as measured by GDP) have evolved. More importantly, checking out the relationship between these two—the Debt-to-GDP ratio—can give us some perspective on whether the nation’s financial obligations are getting more or less manageable.

A Quick Look at the Numbers

In 1970, the U.S. national debt was around $0.38 trillion while the economy’s total GDP hovered around $1.07 trillion. That put the Debt-to-GDP ratio at roughly 35%. Flash forward a decade, and while the debt had grown to $0.91 trillion, GDP had also expanded to $2.86 trillion. In fact, by 1980 the Debt-to-GDP ratio actually dipped a bit to about 32%.

But the stable growth of the 1970s and early 1980s didn’t last forever. As we moved through the ’80s, ’90s, and into the 2000s, both the debt and GDP soared—but the debt started growing faster than the economy. By 1990, the ratio was up to 56%. Entering the new millennium in 2000, the ratio sat at 55%, which might sound modest compared to today’s figures, but at the time, it still felt like a big jump from a generation earlier.

Fast-forward to 2010, and things started looking more concerning. The U.S. debt rose to $13.56 trillion and GDP to $14.96 trillion, pushing the Debt-to-GDP ratio to about 91%. The financial crisis of 2008 and the recession that followed forced the government into stimulus spending, bailouts, and other emergency measures that really expanded borrowing. By the time we reached 2020—amid a global pandemic and massive economic disruptions—the Debt-to-GDP ratio had shot up to 129%, with national debt at $26.95 trillion compared to a GDP of $20.93 trillion.

The U.S. debt to GDP ratio currently stands at around 122.3% as of June 2024. This figure represents the total public debt relative to the country's annual economic output, indicating how much debt the nation has compared to its economic productivity. A ratio above 100% implies that the national debt exceeds the GDP, which can be a point of concern for economic stability and sustainability.

Why Does the Debt-to-GDP Ratio Matter?

A rising Debt-to-GDP ratio can be a signal that a country’s borrowing is outpacing the growth of its economy. Think of it like your own finances: If your debts are growing a lot faster than your income, eventually you might have trouble making payments. For nations, a high Debt-to-GDP ratio can lead to higher interest payments, potential credit rating downgrades, and less room for maneuver in future crises.

The U.S. dollar's role as the world's primary currency for trade is increasingly being re-evaluated by many countries due to a combination of geopolitical, economic, and strategic factors. The imposition of financial sanctions by the U.S., particularly in response to global conflicts like the Russian invasion of Ukraine, has demonstrated how the dollar can be used as a tool of economic warfare, prompting nations to seek alternatives to avoid potential future sanctions.

Additionally, the U.S. has seen a significant increase in its national debt, leading to concerns about the long-term stability and value of the dollar. The growth of economies like China and regional trading blocs has also fostered the use of other currencies in bilateral trade, reducing reliance on the dollar. This rethinking reflects a broader trend towards a more multipolar currency system where the benefits of dollar dominance are weighed against its risks and costs.

What’s Next?

Predicting the future is always tricky, but economists agree that managing long-term debt growth is a key policy challenge. As interest rates and inflation fluctuate, elected officials and policymakers will need to strike a balance between investing in critical areas—like infrastructure, education, and healthcare—and dealing with the debt that has spiraled out of control.

During short periods of time, a growing economy can help keep the Debt-to-GDP ratio in check, as a booming GDP effectively makes the debt load relatively smaller. But in the long run, cost-cutting, revenue adjustments, or more efficient spending is needed to maintain a sustainable debt path.

We’re no longer talking about a future threat or a scenario hovering on the horizon—we’ve already landed squarely in it. The national debt has swelled so large that its gravitational pull is already distorting our economy’s priorities.

Much-needed programs and investments are now having to compete with the hefty price of servicing ever-growing interest obligations.

Policymakers find themselves backed into a corner, their flexibility constrained and their options limited. We are all feeling the impact, too, as the rising cost of borrowing and out of control inflation, coupled with growing uncertainty, chips away at their confidence and constrains their financial well-being. This isn’t some distant warning sign—this is the economic reality we’re living in today.