McKinsey: The growing US national debt threatens investor confidence

The federal debt today stands at $38 trillion, or 120 percent of GDP. This is higher than the 119 percent recorded in 1946 in the aftermath of World War II and barely less than the all-time high set in April 2020 at the height of the COVID-19 pandemic. The United States has one of the highest national debt levels relative to GDP of major economies, behind only Japan, Greece, and Italy in the OECD. From 2000 to 2024, $2.40 of US debt was created for every $1 of net new investment (compared to $1.90 on average globally).

When interest rates are low, growing debts are more manageable, as was the case in the decade following the global financial crisis. However, as inflation took hold after the COVID-19 pandemic, ten-year Treasury yields, the basis for most market interest rates, more than doubled their 2010s average. Interest payments in fiscal year 2024 shot up 34 percent, to $949 billion, exceeding defense spending for the first time (attached image). This continued into 2025.