Government debt

A government that spends more than it collects has to cover the gap. Most of the time it borrows, by selling bonds. A bond is an IOU: you hand the Treasury $1,000 today, and it promises to pay you interest and give the $1,000 back on a set date. Add up every IOU still outstanding and you have the national debt.

On 29 October 2026 that total was $40.59 trillion. This module explains what sits behind a number that size, why economists look at it as a share of the economy instead, how the US brought that share down after the second world war, and what the interest bill does as old loans are replaced. At the end you can run the numbers yourself.

What the debt is, and who it's owed to

The US Treasury sells its IOUs at auction in several sizes: bills that mature in a year or less, notes that run 2 to 10 years, and bonds that run 20 or 30 years. Buyers include pension funds, banks, funds, households, foreign governments and investors, and the central bank, the Federal Reserve.

Part of the debt is owed from one arm of government to another. Of the $40.59 trillion, $7.88 trillion is held by government accounts, such as trust funds that hold Treasury IOUs. The other $32.71 trillion is held by the public. Both count in the headline total.

Deficit and debt are different things. The deficit is the gap in one year. The debt is every past gap added up, plus the interest on it. Think of a bathtub: the deficit is the tap, the debt is the water level. In fiscal 2026, which ended on 30 September, the federal government collected $5.40 trillion and spent $7.40 trillion, a deficit of $1.99 trillion.

In the 12 months to 29 October 2026 the debt rose by $2.52 trillion, from $38.08 trillion to $40.59 trillion. The two numbers don't match to the dollar. The windows differ by a month, and some of the debt's growth is interest credited to government accounts, which raises the total without new cash being borrowed. The point holds either way: while there's a deficit, the debt keeps rising. A smaller deficit slows the climb. Only a surplus turns it around.

Why the ratio matters more than the total

A dollar total on its own says little. A $400,000 mortgage is crushing on a $40,000 salary and ordinary on $400,000. So economists divide the debt by GDP, the value of everything the economy produces in a year, as a rough stand-in for income.

Measured that way, US gross federal debt was 121.1% of GDP in fiscal 2025, and debt held by the public was 97.8%. Switch the chart below between the two views and between dollars and shares. The ticker at the top shows the pace of borrowing over the past year.

The ratio isn't a safety line either. It ignores what interest rate the government pays and who holds the debt. Both come up below.

How the ratio fell after 1946

At the end of fiscal 1946 gross federal debt was 119.1% of GDP, and 106.3% of GDP counting only debt held by the public. That is the highest share the public-held measure has reached in the data, which starts in 1940. By fiscal 1981 the gross figure was 31.0% and the public-held one 24.6%.

It wasn't repaid. Debt in dollars rose from $271.0 billion to $994.8 billion, 3.7 times as much, and fell in only 6 of those 35 years (1947, 1948, 1951, 1956, 1957 and 1969). The ratio fell because the bottom half of the fraction grew faster. Nominal GDP went from $227.5 billion in 1946 to $3,207 billion in 1981, 14.1 times as much. Part of that was real growth. Part was inflation: consumer prices were 4.7 times higher.

Inflation did a second job. Prices rose faster than the debt did, so in 1946 dollars the 1981 debt was 79% of the 1946 debt. And lenders were paid back in money that bought less. In 1974, 1975, 1979 and 1980 the average 10-year Treasury yield was below that year's inflation rate, so people who held Treasuries lost purchasing power.

That isn't a free lunch. The lenders took the loss, and they noticed. By 1981 the average 10-year yield was 13.9% against inflation of 10.3%, so lenders were charging 3.6 points above inflation. The lesson isn't that inflation is a plan. It's that the ratio moves with three things: the interest rate, the growth rate and how much the government borrows before interest. The simulator at the end puts all three in your hands.

The interest bill, and why it moves slowly

The debt isn't one loan at one rate. It's thousands of IOUs bought at different times, at different rates. When one comes due, the Treasury pays it off by selling a new one at today's rate. So the average rate across the whole debt drifts toward whatever the market charges now, and the speed depends on how soon the old IOUs mature.

Treasury publishes that average. It was 3.53% in September 2026, up from a low of 1.56% in January 2022. A 30-year bond yielded 5.48% as a monthly average in October 2026. Not every new IOU costs that much, because bills are cheaper than 30-year bonds, so read the gap as a direction rather than a forecast. Try the rollover calculator under the second view to see how the average responds.

Who holds the debt

Of the debt held by the public, $31.73 trillion in the first quarter of 2026, foreign investors held 29.5%, the Federal Reserve 14.8%, and other US investors (banks, funds, insurers, households, state and local governments) 55.7%. The foreign share peaked at 49.0% in the second quarter of 2008 and was 4.4% in the first quarter of 1970. It has fallen since 2008 as the Fed and domestic investors bought more.

Foreign holders aren't one bloc. In August 2026 Japan held $1,068 billion and the United Kingdom $1,010 billion, with mainland China third at $591 billion, out of $9,332 billion in total. Those country figures record where the securities are kept, so the UK, Belgium, Luxembourg and the Cayman Islands include investors from elsewhere. And a foreign owner is a creditor, not a controller: a Treasury bond is a claim to be repaid on its terms, with no vote attached.

Try it: rate, growth and deficit

Each year the debt grows by interest, which is the rate times the debt, and by the primary deficit, the gap before interest. The economy grows too, which shrinks the debt as a share of it. In short: next year's ratio is this year's ratio times (1 + rate) divided by (1 + growth), plus the primary deficit.

So when growth is above the rate, the ratio can level off even while the government keeps borrowing. When the rate is above growth, interest outruns the economy and the ratio climbs unless the government runs a primary surplus. Set the sliders, or press a preset.

The model holds every setting constant for the whole run, which the real world never does. It also treats the three sliders as independent. In practice higher rates can slow growth, and lenders can ask for higher rates when the ratio climbs. It shows the arithmetic, not a forecast.