Federal Debt: A Heavy Load

The debt continues to grow, but record-low interest rates could ease the long-term damage.

Illustration of Uncle Sam carrying heavy debt burden
Illustration by Fatinha Ramos
(Image credit: Illustration of Uncle Sam carrying heavy debt burden)

As recently as 2007, the amount of federal government debt—Treasury securities held by the public—was just 35% of gross domestic product. At the end of 2019, it was 79%, and it’s likely to hit 104% in 2021. It only gets worse: The debt will likely rise to 109% by 2030 and approach 200% of GDP by 2050, according to estimates from the Congressional Budget Office. Those estimates don’t include another fiscal stimulus (which was being negotiated at press time) and assume Congress won’t extend tax breaks scheduled to expire in 2025.

For most of us, that kind of balance sheet would be ruinous. Interest rates would eat away at our income, making it difficult to pay expenses. Certainly, that has been the traditional view of the federal government’s debt: As rising deficits increase the amount of interest the government must pay each year, there’s less money available for other things. There have also been concerns about what would happen if China and other foreign investors were to stop buying Treasury securities. A deluge of debt would flood the market, and interest rates would have to rise to entice investors to buy it. That would cause interest rates on consumer and business loans to follow suit, which would hurt the economy.

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

To continue reading this article
please register for free

This is different from signing in to your print subscription

Why am I seeing this? Find out more here

David Payne
Staff Economist, The Kiplinger Letter

David is both staff economist and reporter for The Kiplinger Letter, overseeing Kiplinger forecasts for the U.S. and world economies. Previously, he was senior principal economist in the Center for Forecasting and Modeling at IHS/GlobalInsight, and an economist in the Chief Economist's Office of the U.S. Department of Commerce. David has co-written weekly reports on economic conditions since 1992, and has forecasted GDP and its components since 1995, beating the Blue Chip Indicators forecasts two-thirds of the time. David is a Certified Business Economist as recognized by the National Association for Business Economics. He has two master's degrees and is ABD in economics from the University of North Carolina at Chapel Hill.