How We Got Here

Key Takeaways

  • The annual U.S. debt-to-GDP ratio reached 120% in 2024, exceeding levels last seen immediately following World War II.
  • At the most basic level, federal expenditures consistently outpace revenue, driving continued debt growth. Given that federal receipts bounce between 15% and 20% of GDP, in the long-term spending in excess of 20% of GDP is simply not sustainable.
  • The growth of federal debt transcends party lines, driven by major events and policy decisions across administrations.

The United States federal government's debt has grown to over $36 trillion, and the debt-to-GDP ratio is hitting levels not seen since the immediate aftermath of World War II. While there was a brief period in the late 1990s and early 2000s when federal revenues outpaced expenditures, the 2000s and preceding saw rapid debt accumulation.

Gross Federal Debt as Percent of GDP

Annual data (1939-2024)

\ 0%20%40%60%80%100%120%'40'50'60'70'80'90'00'10'20The end of World War IIDebt to GDP: 119%Latest Debt to GDP:123%

The gap between federal revenue and expenditures has widened significantly since the 1960s, with major expansions occurring during economic crises and the implementation of large federal programs. Federal receipts have historically ranged between 15.4% and 20.4% of GDP, with the lowest point during the 2008-2009 financial crisis and the peak during the dot-com boom of 2000. Despite this relatively stable range in revenue collection, the introduction of Medicare and Medicaid in 1965 marked a structural shift in federal spending patterns. More recently, responses to the 2008 financial crisis and the COVID-19 pandemic have led to unprecedented levels of federal expenditure, while revenue remains flat as a share of GDP. In dollar terms, both revenue and spending have grown substantially, but spending has consistently outpaced revenue collection, contributing to the steady accumulation of federal debt.

Federal Expenditures and Receipts

Quarterly data (1947-2024)

Federal Expenditures
Federal Receipts
$0.0$500 B$1.0T$1.5T$2.0T$2.5T506070809000102025

The growth of federal debt transcends party lines, driven by major events and policy decisions across administrations. From Cold War spending, through Medicare expansion, the 2008 financial crisis, to COVID-19 relief/stimulus—each era has added significantly to the national debt. Both Republican and Democratic administrations have overseen substantial increases, highlighting how fiscal challenges stem from structural bipartisan dysfunction in financial management.

National Debt

Quarterly data (1966-2024)

$0.0$5.0T$10T$15T$20T$25T$30T$35T197019751980198519901995200020052010201520202025
Medicare & Medicaid Creation

Medicare & Medicaid Creation

July 30th, 1965
Social Security Amendments established healthcare programs costing $13B by 1970 (6.6% of $195.6B budget), rising to $33B (~10% of $332B budget) by 1975, adding ~$20B to debt by 1970, with no dedicated revenue beyond partial payroll taxes.
Vietnam War

Vietnam War

1965-1973
Military operations cost $120B nominal ($700B in 2025 dollars), with defense spending peaking at $82B (9.4% of GDP) in 1968, funded by deficits after delayed 1968 tax hike, adding ~$50B to debt by 1973.
End of Gold Standard

End of Gold Standard

August 15th, 1971
Nixon's August 15 suspension of dollar-gold convertibility allowed money supply growth (M2 up 10% yearly, 1971-1975), supporting deficits of $25B (1971) to $53B (1976), with debt rising from $303B to $427B by 1973.
Oil Crises & Stagflation

Oil Crises & Stagflation

1973-1979
1973 OPEC embargo and 1979 Iranian crisis cut tax revenue by ~$50B yearly (e.g., $257B in 1975 vs. $279B in 1973), with outlays rising to $332B by 1975, increasing debt from $427B to $620B.
Reagan Military Buildup

Reagan Military Buildup

1981-1989
Defense spending rose from $134B to $282B, totaling ~$2T over the decade, contributing ~$500B to debt, as total debt tripled from $908B to $2.7T by 1989.
Clinton-Era Surpluses

Clinton-Era Surpluses

1998-2001
Budget surpluses of $69B (1998), $126B (1999), $236B (2000), and $128B (2001) reduced debt growth, holding debt at $5.8T by 2001, with debt-to-GDP falling from 65% to 56%. These surpluses were in part due to strong economic conditions during the dot-com boom.
War on Terror

War on Terror

2001-2020
Afghanistan and Iraq operations cost ~$2T nominal, with peak spending of $200B yearly (2007-2008), adding ~$1.5T to debt, as debt-to-GDP increased from 56% to 84% by 2010.
Medicare Part D

Medicare Part D

December 8th, 2003
Prescription drug program cost $409B from 2004-2013, fully debt-financed with no new revenue, adding ~$300B to debt, as debt-to-GDP rose from 64% to 84% by 2010.
2008 Financial Crisis & Recovery

2008 Financial Crisis & Recovery

2008-2010
TARP authorized $700B ($428B disbursed, ~$15B net profit), plus $831B ARRA stimulus, drove deficits to $1.4T in 2009, adding ~$2T to debt by 2010.
COVID-19 Response

COVID-19 Response

2020-2021
Relief packages, including $2.2T CARES Act and $1.9T American Rescue Plan, totaled ~$4.6T, with deficits of $3.1T (2020) and $2.8T (2021), adding ~$4T to debt.
The growth of federal debt transcends party lines, with both Republicans and Democrats contributing significantly. Republican administrations have added to the debt through tax cuts and military spending, while Democratic administrations have expanded social programs and stimulus measures. This pattern reveals how debt accumulation is a systemic, bipartisan challenge rather than a partisan issue.