The US once appeared to be on track to eliminate its debt. In 2001, the US government had recorded a budget surplus for four straight years. The Congressional Budget Office (CBO) had even projected that the national debt could effectively fall to zero by 2009.
That prediction did not come true. Instead of falling to zero, US national debt continued to rise. The debt reached $10 trillion in 2008 and then quadrupled over the next 18 years, crossing $40 trillion in 2026.
The US has moved from surpluses to large and regular deficits. The Committee for a Responsible Federal Budget (CRFB) said the US had a 1.2% budget surplus in 2001, but now runs deficits of around 6% of the economy. Marc Goldwein, senior vice president at CRFB, warned that the country is entering a "debt spiral", according to Yahoo Finance.
Today's deficit is still extremely large. The CBO projects that the US government will run a $2.1 trillion budget deficit in the fiscal year ending September 30, Yahoo Finance reported. The government is also spending a huge amount just to pay interest on its debt. Interest payments now account for about 15% of total federal government spending, according to the US Treasury's Fiscal Data. That is more than the government spends on defense.
Tax cuts played a major role
Large tax cuts were one of the biggest reasons the US moved away from the strong fiscal position it had in 2001. A 2024 analysis by the CRFB found that major tax cuts under President George W. Bush and tax cuts during President Donald Trump's first term account for about 37% of today's debt.
{{/usCountry}}Large tax cuts were one of the biggest reasons the US moved away from the strong fiscal position it had in 2001. A 2024 analysis by the CRFB found that major tax cuts under President George W. Bush and tax cuts during President Donald Trump's first term account for about 37% of today's debt.
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The tax cuts reduced government revenue. When the government collects less money from taxes while continuing to spend heavily, it has to borrow more to cover the gap. The CRFB said the tax cuts immediately reduced revenues and were later extended, often with support from Democrats as well, according to Yahoo Finance.
Other events also hurt the government's finances at the same time. The wars in Afghanistan and Iraq, along with the bursting of the dot-com bubble, added pressure to government finances, according to the CRFB analysis.
Government spending also pushed debt higher
Higher government spending was another major reason for the debt increase. The CRFB estimates that spending increases account for about 33% of the current national debt. A large part of that spending came from the country's aging population. As more Americans grew older, the cost of programs such as Social Security and Medicare increased. The government also expanded parts of the social safety net, adding to federal spending.
Three major programs now take up about half of the federal budget. Social Security, Medicare and Medicaid together consume roughly 50% of federal spending, according to the Peter G. Peterson Foundation.
The CRFB says the debt would have been much lower without the combination of tax cuts and spending increases. Its analysis said that, without those tax cuts and spending increases, the US debt would have been fully paid off.
Recessions and emergencies added another huge amount
Economic crises created another major source of debt. The CRFB calls this category "recession responses." It includes emergency government spending used to deal with economic downturns and the COVID-19 pandemic. These emergency responses account for about 28% of today's debt, according to the CRFB's analysis, according to Yahoo Finance.
The COVID-19 pandemic was especially expensive for the government. The US government approved large emergency spending programs to support households, businesses and the economy during the pandemic. This added significantly to federal borrowing.
Both parties share much of the responsibility
The debt increase cannot be blamed on only one political party. The CRFB's analysis found that a large majority of the spending and tax decisions that added to the debt received support from lawmakers from both parties.
Only a smaller share came from bills supported by one party alone. About 8% of current US debt is linked to Republican-only bills, while 12% is linked to Democratic-only bills. The biggest share came from bipartisan legislation. Around 77% of America's current national debt is linked to bills that passed with support from both Republicans and Democrats, according to the CRFB analysis.
This means the debt problem built up over many years and under different presidents. Tax cuts, spending increases, wars, recessions and pandemic relief all added to borrowing. Many of these decisions had bipartisan support.
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The latest tax-and-spending bill could add even more debt
The debt problem has continued into the current period. The CRFB analysis was published before President Trump's One Big Beautiful Bill Act, so it did not include the impact of that law. That law is expected to add more than $4 trillion to the national debt.
The Bipartisan Policy Center estimates that the One Big Beautiful Bill Act could increase the national debt by more than $4 trillion. This means the $40 trillion milestone may not mark the end of the problem. If the government continues to spend more than it collects in revenue, it will need to keep borrowing to cover the difference.
What happens next?
The CBO expects the debt burden to keep rising. The agency projects that US debt could reach about 120% of the size of the entire US economy by 2036. The outlook becomes even worse over the longer term. CBO projections show debt rising to around 156% of the US economy by 2055, according to Yahoo Finance.
The big change from 2001 is clear. The US went from having a budget surplus and a CBO projection that debt could effectively reach zero by 2009 to carrying more than $40 trillion in debt today. The main reason is not one single event or one president. The CRFB's analysis points to three major forces: tax cuts, higher government spending and emergency spending during economic crises.
The result is a government that now spends a large amount just servicing its existing debt. With interest payments already taking about 15% of federal spending, rising debt means the government could face even larger interest costs in the future.
In simple terms, the US debt story is a shift from surplus to repeated borrowing. The country once collected more money than it spent. Today, it regularly spends far more than it collects, and the gap is being financed through more borrowing.