America's debt surpasses $36T and would keep growing under Trump bill. How did we get here?

As it begins its 249th year in business as a country, the United States owes more than $36 trillion in debt and spends nearly $2 trillion more per year than it collects.

Those numbers won’t be decreasing if the One Big Beautiful Bill Act becomes law. The legislation, named and trumpeted by the president as a clearinghouse for his domestic agenda, cleared the Senate and was being mulled by the House as of this writing.

Read the legislation here: One Big Beautiful Bill Act

President Donald Trump has set a deadline of Friday for passage. That would coincide with U.S. Independence Day celebrations.

The bill could be the greatest thing to happen to the country in 97 years, when, on July 7, 1928, the Chillicothe Baking Co. began selling sliced bread using a machine developed by Otto Frederick Rohwedder.

That’s the position of the White House and those who support the administration.

There is no support for the legislation among Democrats, and even some of the GOP senators who voted in favor of the bill were wary of its impact on the national debt, the deficit spending it would perpetuate and the cuts to Medicaid and other social safety net programs.

Republicans are generally opposed to excessive federal spending, but, in this go-round, only the likes of fiscal hawks such as Kentucky’s U.S. Sen. Rand Paul and U.S. Rep. Thomas Massie and a few others were solidly opposed to the bill.

People of a certain age might remember worries of previous times about deficit spending, the national debt and the imminent crises that were supposed to unfold if spending wasn’t reined in.

Of debts, deficits and debt ceilings

First, let’s be clear about the terms being bandied about these days.

The national debt is the amount of U.S. Treasury securities that are outstanding. As of May 31, it was $36.2 trillion.

The debt consists of U.S Treasury notes and savings bonds the government issues that are considered the most secure, reliable investments money can buy, literally, according to Yale economist Ernie Tedeschi, who is director of economics at the university’s Budget Lab.

“The entire world financial system is founded on safe assets,” Tedeschi said.

A budget deficit is when the country spends more than it takes in. The national budget was last balanced in fiscal year 2001, which started Oct. 1, 2000, and ran through Sept. 30, 2001. There was a $128 billion surplus that year.

Previously, the budget was last balanced in 1969.

The debt ceiling is the borrowing limit set by Congress. It needs to be increased when it is met or the country would default on its debt. That threat has been used as a bargaining chip for much of the past decade as an evenly divided legislature spars to determine federal spending.

The One Big Beautiful Bill Act would increase the debt ceiling by $5 trillion.

A brief credit history of the U.S.

In 1975, the U.S. owed $533 billion. It was the end of the Vietnam War and the start of a period of what was called stagflation because economic growth was flat, but prices were increasing.

By 1985, the debt more than tripled to $1.8 trillion as President Ronald Reagan cut taxes twice in the 1980s while also increasing defense spending.

In 1995, the debt was $4.9 trillion, and by 2005 it was $7.9 trillion. A decade ago, in 2015, it stood at $18.1 trillion.

Those increases have come amid good times and bad. As the 20th century was coming to a close, the Congressional Budget Office was projecting the debt could be paid off by 2010.

That would have been the first time the country was debt-free since 1835, when President Andrew Jackson celebrated that achievement.

As the 21st century dawned, extraneous events intervened and ended any hope of halting federal spending, however: 9/11, its impact on the economy and the cost of the wars in Afghanistan and Iraq; recovery costs from hurricanes; and several recessions.

Why it matters

The $1 trillion question now is: Why should we care?

Pretty much the weight of the world hangs in the balance, economists say.

Really.

Think tanks like the nonpartisan Peter G. Peterson Foundation say a debt crisis is unfolding.

“The nation has never… experienced the debt explosion that we have had since 1981,” Dana M. Peterson and Lori Esposito Murray wrote in a paper published by the foundation that aims to sound an alarm.

“The danger of this explosion has been sidestepped, obscured or excused over the past several years due to low interest rates,” they wrote.

There is a well-established correlation to increasing the national debt and rising interest rates, Tedeschi said.

It means the government ends up paying those who invest in U.S. Treasury bills and savings bonds more money for longer periods of time, Tedeschi said.

As revised by the Senate, the bill would cause the U.S. debt-to-GDP ratio to hit 186% in 2055, according to Yale’s projections.

The metric compares the total debt of a country to the total value of its goods and services, and it’s used to determine how likely it is a country can make good on its debts.

According to the International Monetary Fund, the U.S. ratio was about 119% in 2023. Other 2023 ratios, according to the IMF: Japan, 250%; Sweden, 36%; France, 110%.

The U.S. ratio is pegged at about 125% currently, according to Yale.

“The connection to households isn’t obvious,” he said.

But U.S. Treasury rates are the benchmark upon which the world’s financial markets are based.

That means, when 10-year treasury rates go up, so do mortgage rates and those for car loans and small businesses.

Before the Senate revised the legislation over the weekend, the Budget Lab projected the impact the law would have on annual mortgage payments for a typical house — they used $412,000 — with a 20% down payment.

It would add about $4,000 in additional costs per year over 30 years of a typical mortgage, Tedeschi said.

“Now, we’re talking about substantial kitchen table and cost-of-living issues,” Tedeschi said.