The ugly debt monster grew faster than current-dollar GDP.

By Wolf Richter for WOLF STREET.

The US government-debt monster needs to be looked at in context, not by itself in a vacuum, though I’ll post the debt-in-a-vacuum chart at the bottom of the article for your amusement.

At the end of Q4, the US national debt reached $38.51 trillion, having soared by yet another $2.30 trillion over the 12 months in the calendar year 2025, or by 6.3%.

This includes the first half of the year, when the debt ceiling blocked the government from adding to its mountain of Treasury securities, and the level of debt got stuck for six months.

And then in July, after the debt ceiling was resolved, the debt began to explode. All of that $2.3 trillion were added in the second half amid a tsunami of debt issuance. Debt was flying by so fast it was hard to see.

In Q4 alone, so quarter over quarter, the debt rose by $877 billion, or by 2.3% from Q3.

With Q4 GDP having been released on Friday — GDP got hit by a massive plunge in government spending due to the shutdown — the US debt-to-GDP ratio rose to 122.3% at the end of Q4, the highest since Q1 2021, as the covid spike was winding down.

This debt is the actual amount in Treasury securities that the US government owes and cannot walk away from. They are either traded in the markets ($28.84 trillion) or are held by government pension funds, the Social Security Trust Fund, etc. that owe their beneficiaries those funds ($7.38 trillion).

The debt-to-GDP ratio is the total Treasury debt at the end of the quarter in dollars, not adjusted for inflation, divided by annual rate of “current dollar” GDP in dollars for that quarter, also not adjusted for inflation. Neither is adjusted for inflation for an apples-to-apples comparison. Since the inflation factor is the same in the numerator and denominator, it cancels out and is not impacting the ratio.

The debt-to-GDP ratio rose because the debt increased by 2.3% in Q4 from Q3, while current-dollar GDP increased by only 1.3%.

$38.51 trillion in debt meets $31.49 trillion annual rate in current-dollar GDP.

For the whole year, the debt increased by 6.3%, and current dollar GDP increased by 5.6%.

If the debt increases faster than current-dollar GDP, the ratio continues to rise.

The debt-to-GDP ratio is important because an economy generates tax revenues that grow roughly with the economy, and tax revenues are needed to service this debt.

If the economy grows faster than the debt year after year, then the burden of that debt on the economy begins to lessen. But that’s not happening at this point.

For now, this growing debt-to-GDP ratio means a more leveraged government, and a higher burden on the economy.

Another way to look at the debt in context is in terms of interest payments and tax receipts, which I did for Q3 last year, with new figures coming next month: US Government Interest Payments to Tax Receipts, Average Interest Rate on the Debt, and Debt-to-GDP Ratio in Q3 2025

And here for your morbid amusement, the US Treasury debt in a vacuum. It spiked by 88% in seven years, to $38.74 trillion as of Friday.

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WOLF STREET FEATURE: Daily Market Insights by Chris Vermeulen, Chief Investment Officer, TheTechnicalTraders.com.