America's Debt Is Now Bigger Than the GDP. Does It Matter?

The United States national debt has now grown beyond the size of the country's GDP, punctuating a long-running trajectory that has left budget hawks skittish, but Congress appears uninterested in countering.

According to advance estimates released Thursday by the Bureau of Economic Analysis (BEA), America's gross domestic product (GDP) totaled $31.22 trillion over the 12 months to March 31, now slightly under the $31.27 trillion in debt held by the country at the end of this quarter.

It marks the first crossing of the 100 percent threshold-double the historical average-outside of wartime since shortly after WWII and briefly during the early stages of the COVID-19 pandemic. This has renewed calls from concerned lawmakers and groups for an urgent change in course, as the U.S. continues to run historically large deficits that could soon break the 106 percent record.

"We have now borrowed more money than our economy produces in a year," Maya MacGuineas, president of the Committee for a Responsible Federal Budget, told Newsweek.

"The debt slows economic growth, pushes up borrowing costs and prices, and leaves us vulnerable to a fiscal crisis in the future," she said. "There are good milestones, and bad ones, and this is the worst kind there is."

Why It Matters Now

Experts who spoke with Newsweek say crossing the 100 percent barrier is a symbolic threshold rather than one that triggers any immediate crisis, but one that, to some, underscores the fiscal difficulties associated with ballooning the national debt.

These include rising interest payments, potential erosion of investor confidence and economic growth, and inflation if governments choose to finance debt through monetary expansion. These corrosives would prove particularly acute given today's elevated interest rates and structural budget difficulties, and may be becoming more so as successive governments fail to pursue the presumably unpopular solutions of spending cuts and tax hikes.

Is Debt a Problem?

Many experts insist that while the national debt creates headaches for the economy, it is far from the crisis fiscal hawks often portray it as, given that the U.S. remains a preeminent superpower and has the economic might to avoid any default-driven catastrophe.

"Debt is neither inherently good nor bad," economist Claudia Sahm wrote in 2024. "As such, the question is not what's the right level of borrowing, but rather what's the economic return on the borrowing or the societal goals it advances."

Rising interest costs, Sahm said, only prove an issue if an economy fails to grow commensurately, while debt-financed investments in the public good can avert far more immediate economic difficulties.

However, a widely held view among economists and politicians is that the country's current fiscal path is unsustainable, and surveys show a majority of Americans now consider it a priority issue.

A ‘Completely Arbitrary' Milestone?

"America just crossed a dangerous milestone: our national debt now exceeds the size of our economy," former South Carolina Governor and United Nations Ambassador Nikki Haley posted on X on Thursday, adding: "When the bill comes due, expect higher taxes, a weaker dollar, fewer services, a weaker military-and our kids stuck paying for it."

Others, however, argue that the BEA's revelation means little besides putting wind in the sails of those who have championed greater fiscal discipline by Washington, and that the “bill” of which Haley warned may never “come due.”

"I don't think this number has any significance at all," said J. W. Mason, an associate professor of economics at John Jay College, City University of New York.

Mason told Newsweek the 100 percent milestone was "completely arbitrary," and that there was "no evidence that a country like the United States has any reason to worry about the ratio of debt to GDP."

"If we look around the world, we can find many countries whose debt ratios are higher than the United States…and not a single one of them has experienced any of the harms this high level of debt is supposed to have caused,” he said.

Mason pointed to Japan, whose total government debt has, for over a decade, been double its GDP and where typical warnings about interest rates and currency devaluation have not taken hold.

"Interest rates have been some of the lowest in the world there; High inflation? Japan is struggling with deflation. Are we worried about a collapse in the value of the currency? I think a lot of Japanese manufacturers wish their currency was weaker,” he said.

He added that the U.S. will remain able to pay interest on the debt by "borrowing more debt" indefinitely, and that warnings over imminent risks often double as cover for pro-austerity agendas.

The Risks of Doing Nothing

Douglas Elmendorf, professor of public policy at Harvard University’s Kennedy School of Government, similarly said that "nothing unusual will happen just because federal debt is passing 100 percent of GDP, any more than happened when debt passed 80 or 90 percent of GDP."

However, Elmendorf, the former director of the nonpartisan Congressional Budget Office (CBO), told Newsweek that rising debt means that the government "is spending ever more on interest payments."

"And if lenders worry that the government won't meet those payments, they will demand higher interest rates, which would make debt rise even faster," he said, creating a "fiscal crisis" which could push up the costs of every type of lending from mortgages to car loans while driving the nation toward a "deep recession."

Economist Stephanie Kelton, meanwhile, said that the true constraint is inflation rather than debt levels, pointing to budget forecasts issued by the CBO, which she said showed that if prices are controlled and the economy is running near full employment, "then you don't have a long-term debt problem."

"Long before the war in Iran, they had the debt ratio exploding higher with inflation returning to the Fed's two-percent target and the economy running at full employment. So where's the problem?"

In Kelton’s view, the greater risk to consumers would come from efforts to aggressively reduce the debt rather than from allowing it to remain high.

The fact that America's publicly held debt now exceeds economic output does not herald an imminent crisis, some seeing sustained growth and stable inflation as rendering fiscal anxieties less alarming, if not meaningless.

But to others, this highlights the unsustainable fiscal path the U.S. is now on, one which could mean higher interest rates and slower growth if lawmakers continue treating it as a problem too large to ignore but too distant to confront.

2026 NEWSWEEK DIGITAL LLC.

This story was originally published May 1, 2026 at 1:01 PM.