The National Debt is front page news this week. It seems time to ponder the issue and try to put it in perspective. It is said that debt is what helped make this country great and there is some history to suggest that. The debt began at Independence during the Revolutionary War, which left the young country roughly $75 million in the hole. It was the great Alexander Hamilton’s 1790 plan to have the federal government assume state war debts that established the practice of financing government through borrowing. The debt was actually paid off entirely in 1835 under Andrew Jackson… the only time in U.S. history. But the Civil War exploded it from about $65 million (1860) to $2.7 billion (1865). It then stayed relatively modest through the rest of the Nineteenth Century. But then the 20th Century brought about the big structural shifts that laid the groundwork for our current picture. WWI pushed debt past $25 billion and then the Great Depression and New Deal programs drove significant peacetime borrowing in the 1930s. WWII was the largest jump in relative terms with debt-to-GDP hitting its all-time peak around 106–119% (all-time peak until now, that is) by 1946 as the government financed the war effort. Postwar economic growth shrank the debt-to-GDP ratio for decades even as the dollar amount grew, bottoming out around 23-25% of GDP by the late 1970s. It is always hard for me to imagine why Republicans especially don’t acknowledge that the use of debt during the Depression brought about prosperity and the peace time prosperity after WWII combined with sensible progressive tax policy gave us the best years of our lives. This is why it’s said that debt made our country great.
But then came the Reagan era. The 1980s marked a turning point as Republican tax cuts combined with increased defense spending under Reagan roughly tripled the debt from about $900 billion to $2.6 trillion. The 1990s saw budget surpluses under Clinton (helped by a tech-driven economic boom), briefly slowing accumulation and even producing a few years of actual surplus (1998–2001), the closest the U.S. came to paying it down since Jackson. But then the 21st Century brought about sustained acceleration in debt accumulation. In the early 2000s, the Bush-era tax cuts, two wars (Iraq/Afghanistan), and the 2008 financial crisis bailout drove debt from about $5.7 trillion to $10 trillion. The 2010s brought slow recovery-era deficits that took the debt past $22 trillion by 2019. 2020–2021 when COVID-19 relief spending (CARES Act and successors) caused the sharpest short-term jump in history, pushing debt-to-GDP to a post-WWII record of about 133%. At least one could argue that, like the Depression, that was a sensible national need for the use of debt to jumpstart prosperity. But 2022–2025 brought continued deficits (driven by demographically-driven entitlement growth, increased defense spending, and rising interest costs) pushing gross debt past $36 trillion by early 2025.
Where things stand now (August 2026) is that total gross national debt has now hit $40 trillion as of August 18, 2026, with debt held by the public at $32.10 trillion and intragovernmental debt at $8 trillion. That’s almost $3 trillion higher than a year ago. Debt as a percentage of GDP was 123% as of Q1 2026, still below the pandemic-era peak of 133% in Q2 2020 but well above the long-run historical norm. Net interest costs are forecast by the CBO to hit nearly 14% of federal outlays in FY2026, continuing a trend of interest payments consuming a growing share of the budget as rates have risen — the average interest rate on marketable debt is now about 3.44%, up from 1.48% five years ago. The debt is currently growing by roughly $6.3 billion per day.
The throughline is that for most of U.S. history, debt spiked during wars and crises, then shrank relative to the economy during subsequent growth. Since the 1980s, that pattern has broken down. Debt has grown in both dollar terms and relative to GDP fairly continuously across both recessions and expansions, driven increasingly by structural factors rather than one-off emergencies. It’s like reading that Americans are now using consumer debt to finance everyday purchases. That can’t possibly lead to anywhere good. If I were a Republican I would say that its due to entitlement spending and excessive waste and fraud. Let’s consider that accusation. The evidence is real but more nuanced than the political rhetoric suggests. GAO’s FY2025 government-wide report found $186 billion in payment errors across federal agencies. HHS estimated over $100 billion in combined Medicare/Medicaid improper payments in FY2023 — 43% of the government-wide total and 26% of federal program spending in those programs. Medicaid and SNAP alone accounted for more than $47 billion in improper payments in FY2025. But “improper” mostly doesn’t mean fraudulent. This is the crux of the disagreement. GAO notes that improper payments are not a measure of fraud or abuse but rather mostly result from missing documentation or administrative errors, not payments to ineligible people or providers. A payment can be “improper” because a caseworker didn’t file the right form, even though the recipient was fully eligible and the money was spent correctly. There’s active dispute even over the improper-payment numbers themselves. The Trump administration cited $140 billion in CMS improper payments for 2024, but GAO’s actual Medicare figure was $54.3 billion, and CMS’s own total across Medicare, Medicaid, CHIP, and ACA programs combined was $87.1 billion. That means the administration’s figure exceeded even the broadest official tally. Meanwhile government-wide improper payments actually fell $74 billion between 2023 and 2024, to $162 billion. Actual proven fraud is harder to quantify, and enforcement is intensifying. GAO explicitly states there are no reliable measures of fraud itself. It can only be confirmed after the fact and if caught, unlike the improper-payment rate which is estimated systematically.
If I’m a Democrat I say its all due to tax policy. The relevant recent policy is the One Big Beautiful Bill Act (OBBBA), which permanently extended most of the 2017 Trump tax cuts plus added new provisions. The Congressional Budget Office (CBO) estimates that the 2025 reconciliation act increases primary deficits by $3.7 trillion from 2026 to 2035; increased debt service adds another $0.9 trillion, bringing the total deficit impact to $4.7 trillion in CBO’s February 2026 baseline. Tax provisions, including the permanent extension of the 2017 tax act, increase deficits, along with increased defense and homeland security spending, while changes to Medicaid and SNAP partially offset that (fairly or unfairly) by reducing deficits. Deficits from 2026 to 2035 are now projected to total $23.1 trillion, $1.4 trillion more than CBO projected in January 2025, before the law passed. Debt held by the public rises from 101% of GDP in 2026 to 120% by 2036, well above the previous post-WWII record of 106%. Higher tariffs (Trump’s panacea) are estimated to reduce deficits by about $3 trillion over the same period, cutting the reconciliation law’s net effect roughly in half when combined…but that is very dubious as Trump backs away from his tariffs whenever needed. Lower immigration is projected to increase deficits by about $500 billion, working in the opposite direction. The net result: CBO projects the FY2026 deficit at $1.9 trillion (5.8% of GDP), growing to $3.1 trillion (6.7% of GDP) by 2036.
Everyone knows where I come out on this debate. The real question is, given that no one believes deficit spending for current normal needs is sustainable, do we stop being a country that supports its people in need or do we continue to promote irresponsible tax policies that accumulate more wealth for those who really don’t need it? You decide.