U.S. National Debt Highest Ever, Two Months Into Biden's Presidency

Over two months into Joe Biden's presidency, the national debt has grown to about $28.1 trillion, a record high, according to Treasury Department data as of April 6.

The total public debt outstanding comprises both public debt and intragovernmental holdings. Over two-thirds of the total debt is held by the public. The national debt was $28 trillion on March 1.

Also in March, the Congressional Budget Office (CBO) reported that the debt-to-GDP ratio is projected to increase to 102 percent by the end of 2021. By the end of 2020, the ratio had risen above 100 percent. This ratio compares a country's debt to its total economic output for the year, as measured by gross domestic product. The ratio indicates how strong a country's economy is and gauges how likely it is to pay off its debts.

The CBO also predicted the federal budget deficit will reach $2.3 trillion in 2021. At 10.3 percent of the GDP, the deficit in 2021 would be the second largest since 1945. Before the pandemic, the fiscal year 2020 deficit was projected to be $1.1 trillion. The CBO said the deficit has widened significantly as a result of the economic disruption caused by the coronavirus pandemic and the federal legislation enacted in response, such as the March 2020 $1.9 trillion economic relief bill.

As COVID-19 vaccinations reduce the spread of the coronavirus and states ease restrictions to open up their economies, the CBO expects real GDP, which is adjusted for inflation, to grow by 3.7 percent in 2021.

The high debt and the debt-to-GDP ratio do not worry Mark Weisbrot, co-director of the Center for Economic and Policy Research.

"The relevant measure of the burden of the debt is not the stock of debt relative to GDP," Weisbrot told Newsweek. "But it's actually the interest annually that's paid by the federal government on the debt."

The national debt's interest is the amount the federal government must pay on outstanding public debt each year. According to the Office of Management and Budget, interest on the debt is $378 billion for fiscal year 2021.

The net interest payments on the federal debt are 1.4 percent of GDP for 2021. Weisbrot said this is "very low" according to any historical or relevant comparison for the U.S. For example, he said, the interest payments in the 1990s hit around 3 percent.

"The real burden is what the government has to pay each year to the debt, so when interest rates are really low, like they are today, this burden comes down," Weisbrot said. "So that fact that the debt is very high, relative to GDP, doesn't have much economic meaning at this time or going forward over the next decade."

In a testimony before a Senate panel at the end of March, Treasury Secretary Janet Yellen said she believes the U.S. can afford to invest trillions in projects meant to boost productivity, even with the national debt exceeding historic highs, according to The Hill.

Yellen previously expressed concern in 2017 when the debt-to-GDP ratio reached around 75 percent. According to the World Bank, when the debt-to-GDP ratio exceeds 77 percent, economic growth slows. Now, as that ratio has increased, the country has more room to spend, Yellen said.

"My views on the amount of fiscal space that the United States [has], I would say, have changed somewhat since 2017," Yellen said. "Interest payments on that debt relative to GDP have not gone up at all, and so I think that's a more meaningful metric of the burden of the debt on society and on the federal finances."

National Debt Clock
A billboard displaying the national debt on December 18, 2019, in Des Moines, Iowa. The national debt reached $28 trillion as of March 1 this year. Steven Pope/Getty Images for PGPF