The gross national debt in America has hit new heights, surpassing $31 trillion, according to a U.S. treasury report released this week.
If you find that hard to wrap your head around, it basically boils down to more than $93,000 of debt for every person in the country, according to the Peter G. Peterson Foundation.
And with the dramatic rise in interest rates over the past few months - the Fed funds rate is currently between 3% and 3.35% - the national debt will be growing at a rate that makes it even harder to ignore.
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The last couple of years have been expensive
A deficit is what happens when the government spends more money than it brings in through taxes - and the last couple of years have been expensive.
Several large bills with hefty price tags have been approved since the start of the pandemic, including the American Rescue Plan Act, which cost $1.9 trillion, and $750 billion for student debt relief, all adding to the deficit, which then adds to the debt.
And though the Inflation Reduction Act, which was passed in August, is expected to reduce the deficit by $240 billion, policies and programs brought in by the Biden Administration are expected to add trillions more over the next decade.
The Committee for a Responsible Federal Budget estimates that $4.8 trillion will be added to the deficit by 2031.
"Excessive borrowing will lead to continued inflationary pressures, drive the national debt to a new record as soon as 2030, and triple federal interest payments over the next decade - or even sooner if interest rates go up faster or by more than expected," says the CRFB.
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Much of the borrowing in the past couple of years happened while interest rates were historically low, but now that they're not, with inflation rising at the fastest pace in decades, the cost of this debt is likely to be amplified.
Currently, more than $965 million is spent every day just in interest on the national debt. The Peterson Foundation estimates that will triple over the next decade, making it the fastest-growing item in the federal budget.
So who owns America's national debt?
There are different kinds of national debt. Think about it like having a credit card, a mortgage and a car payment - all debt, but different. The U.S. Department of the Treasury manages the national debt, which is split between what one government agency owes to another and debts that are held by the public.
Intragovernmental debt accounts for about $6.5 trillion of the debt.
The much bigger piece of the debt is held by the public. Right now, that's about $24 trillion.
Foreign governments as well as banks and private investors, state and local governments and the Federal Reserve own most of this debt, and it's held in Treasury securities, bills and bonds.
Foreign governments and private investors are one of the biggest holders of the public debt, owning around $7.7 trillion. Domestically, the Federal Reserve holds the largest share of the public debt, at about 40%.
Ultimately, rising interest rates will only exacerbate the national debt, making it harder for the government to respond to a slowing economy.
"For too long, policymakers have assumed perpetually low interest rates, and we are now seeing in real time how dangerous that assumption is," said Michael A. Peterson, CEO of the Peter G. Peterson Foundation in a statement.
"As our debt crosses $31 trillion, it's past time for action."
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.