The US has $36 trillion in debt. What does that mean, and who owns it?

On Sunday, a key congressional committee in the United States approved President Donald Trump’s new tax cut bill, which could pass in the House of Representatives later this week.

The bill extends Trump’s 2017 tax cuts and may add up to $5 trillion to the national debt, deepening worries after a recent US credit ratings downgrade by Moody’s on Friday, which cited concerns about the nation’s growing $36 trillion debt.

The US has the highest amount of national debt in the world and is facing growing concerns about its long-term fiscal stability.

Debt is simply the total amount of money the US government owes to its lenders, currently amounting to $36.2 trillion. This represents 122 percent of the country’s annual economic output or gross domestic product (GDP), and it is growing by about $1 trillion every three months.

The highest debt-to-GDP ratio was during the pandemic in 2020, when the ratio hit 133 percent. The US is among the top 10 countries in the world with the highest debt-to-GDP ratio.

When the government spends more money than it collects, it creates a deficit.

To cover this deficit, the government borrows more money. To ensure that borrowing is subject to legislative approval, the US Congress sets a limit to how much the government can borrow to fund existing obligations like Social Security, healthcare and defence. This limit is known as the debt ceiling.

Once the ceiling is reached, the government cannot borrow more unless Congress raises or suspends the limit. Since 1960, Congress has raised, suspended or changed the terms of the debt ceiling 78 times, allowing the US to borrow more money.

The federal deficit is how much more money the government spends than it brings in during a single year. A federal surplus would mean the US is bringing in more money than it is spending.

Source: Aljazeera