THE NATIONAL DEBT IS BIG. Last year, the U.S. economy produced about $27.9 trillion worth of goods and services. At the end of 2023, the U.S. national debt was about $33.2 trillion.

So, America's debt is currently bigger than its economy.

The U.S. national debt has accumulated over decades. Each year the government spends more than it receives, the debt grows. When the government spends less than receives, the debt shrinks. Over the last 50 or so years, the government has taken in more than it spent only five times. The last time was 2001.

The debt generally falls into two categories:

Debt held by the public amounted to about $26.9 trillion in 2023. It includes U.S. Treasury securities that have been sold to investors. Economists generally consider this to be "the most meaningful measure of debt, because it reflects the amount that the Treasury has borrowed from outside lenders through financial markets to support government activities," reported the Peter G. Peterson Foundation.

Debt the government owes itself, which amounted to about $7.1 trillion in 2023. This is the money the U.S. government owes to itself. For example, when Social Security, Medicare, and other national government programs take in more than they need. The extra is invested in U.S. Treasuries that are held in the program's trust funds.

We're not alone. The level of government debt has grown around the world. The Institute of International Finance forecasts that global debt would total $310 trillion for 2023, reported Sam Meredith of CNBC.

How do we finance the debt?

The U.S. government finances its debt by selling securities such as Treasury bills, notes, bonds. When the debt grows or interest rates rise, the cost of interest increases. As a result, less money may be available for programs that support economic growth, education, Social Security, and other programs.

Higher debt can lead to slower economic growth. "A study by the World Bank found that countries whose debt-to-GDP ratios exceed 77% for prolonged periods experience significant slowdowns in economic growth," reported Will Kenton of Investopedia. Since the U.S. economy and the U.S. stock market tend to be highly correlated, market returns might slow, too.

Some economists point out that higher rates can stimulate economic growth because they put more money in the hands of consumers, and consumers tend to be the driving force behind the U.S. economy. "…People who are holding government bonds, paying higher rates of interest, are getting a huge windfall in the form of interest income and that income can be spent just like any other form of income," explained a source cited by Charlotte Morabito of CNBC.

How much is too much?

Economists are uncertain how much debt is too much debt for developed nations to hold. Last year, though, researchers at Penn Wharton of the University of Pennsylvania suggested that 200 percent of gross domestic product (GDP) would be the limit for the United States. In 2023, U.S. debt-to-GDP ratio was 123 percent.

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