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.
Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the mug to find out how:
Debt is like snow…it adds up and up…if it isn’t minded you can be killed in an avalanche.
The Eurozone has a cap of 3% deficit, and if you exceed it, sanctions will follow. We have double that. Definitely not sustainable…
The debt ceiling is an utter joke with congress and the executive unable to see anything like reality. Without these stupid tax cuts of the last decade we would not be facing this fiscal cliff.
But hey, deficits don’t matter if you are Dick Cheney and you are dead. For the rest of us, it will matter, and someday much sooner than we had seen years ago.
How does this play out? Well, we have a bunch of big tax increases on medicare, social security, capital gains, and income taxes, and corporate taxes, plus killing every single scam loophole for all these taxes. That balances the budget, and we all live happily ever after. But first, to get to this bitter reality, we must have our fantasy of tariffs doing all that heavy lifting.
Morons. OUR politicians, and OUR voters.
There, problems solved, if only America was brave enough, and smart enough to realize the free lunch is over, the boomers ate it, and we have to clean it up.
Not enough people willing to make sacrifices from their imaginary wealth, because this threatens the dollar and our ability to keep on top of the world economy.
But hey, it’s going to be somebody else’s problem, riiiight?
Nope, unless you go quick (like going in hospice), you are in the boat with the rest of us.
The first huge spike in the graph was due to the financial crisis and under Obama who also cut some taxes but gotta get that Dick cheney jab in
The charts and the raw numbers do not discriminate between political parties; the debt has surged under both Republican and Democratic administrations regardless of the specific catalysts involved. While it is true that we issue our own currency and therefore cannot go bankrupt in the traditional sense, we are certainly approaching the limits of our fiscal maneuverability. The primary issue is the lack of honest, hard discussion regarding the long-term sustainability of our current spending trajectory.
That’s my point.
We have actually decreased this ratio before and the world didn’t end. We did it in the 60s to 80s and again in the mid 90s.
It takes the parties actually working together. And honestly it isn’t even that hard. Lower rates of spending growth. Let the economy grow more. Maybe raise taxes a touch but the government will just spend whatever taxes they raise. I’d rather them start with spending increase slowdowns
Bushwa. The first big spike came before 9/11 when Dick made his deficits don’t matter, reward the base.
Blame starts there. And spare me the bipartisan schtick. They both are somewhat to blame, but the blatant GOP concern switch when they are in opposition is such a long term blatant hypocritical part of the record that it deserves special blame and mention. If you don’t like it, don’t sit there and play Proxmire, because he is dead as well.
Eric86:
Nope, Bush. Obama took office on 1/20/2009, halfway up that spike you are referring to.
Federal receipts as a % of gdp have pretty much always been under federal outlays as a % of gdp. Under every president
Guess you missed Clinton, which was the last time we were in a great long term fiscal position. But whatever.
Cutting expenses enough would entail parking those aircraft carriers, and playing really small global ball. Ready for it? Right now, today, 20% of our farmers are surplus, and if you stop paying them to turn corn into ethanol to put into engines? Pffft.
Like so many, you greatly underestimate how interest is starting to run away, and that will be that.
Math doesn’t care about you or me, it just is, and it will dictate how this starts to go south.
And you purposely hearken back to when we had adults in the room. Welp, those were WW2 folks who remembered the 1930s. They knew if they screwed up that era was going to come back.
Here it is. Like a little fascism, bad economic experimentation, etc?
Good night, good luck, try not to die.
And hope adults will sell or force the crap sandwich again, or the dollar will die and we will have to deal with a world turned upside down.
And make no mistake, we are talking about the death of the dollar, and all that means, including the death of exorbitant privilege.
So stuff protecting a bunch of partisan morons, and realize the stakes are fast exceeding what anyone seems to think is possible.
Want a discussion about how to recover from this?
How about a Rentenmark? LoL.
It sure ain’t going to be crap beanie baby coins.
There is only one choir in congress that even attempts to sing a debt reduction song and they don’t starts with D’s. The media is as much to blame because anytime a reduction in spending for anything is broached, people will die, children will go hungry, the marginal will suffer, and the sky will surely fall.