The U.S. $37 Trillion National Debt Milestone Signals a Critical Need For Fiscal Discipline and Reforms

The U.S. national debt has surpassed $37 trillion for the first time, as reported by multiple sources including the US Debt Clock and the U.S. Treasury Department.

The debt stood at approximately $37.08 trillion as of early July 2025, reflecting a dramatic rise from $23 trillion in 2019 and $36 trillion earlier in 2025. This equates to roughly $108,000 per American citizen and $323,000 per taxpayer, with a debt-to-GDP ratio of 123.1%.

The federal budget deficit exceeds $2 trillion annually, with interest payments on the debt reaching about $1 trillion per year, consuming roughly 25% of tax revenue. Since the debt ceiling was lifted on July 4, 2025, with the “One Big Beautiful Bill Act,” the debt has increased by about $780 billion, averaging $22 billion in new borrowing daily.

The U.S. spent $1.1 trillion on interest in 2024, nearly double the amount from five years prior, outpacing spending on Medicare and defense. Projections suggest the debt could hit $40 trillion by the end of 2025 and potentially $55 trillion by 2034 if current trends continue.

Economic Implications of $37 Trillion National Debt

The debt, at 123% of GDP, absorbs significant capital as the government borrows heavily to finance deficits (currently ~$2 trillion annually). This crowds out private investment by increasing borrowing costs for businesses and households, as capital is diverted to purchasing Treasury securities.

The Congressional Budget Office (CBO) estimates that unchecked debt could shrink GDP by $340 billion over the next decade, potentially costing 1.2 million jobs and slowing wage growth. Annual interest payments on the debt are approaching $1 trillion, consuming about 25% of federal tax revenue.

This diverts funds from critical programs like Social Security, Medicare, and infrastructure, straining the federal budget. As interest rates rise (e.g., 10-year Treasury yields increased from 1.1% to 5.0% under recent policies), the cost of servicing debt doubles, exacerbating fiscal pressure.

High debt levels reduce the capital stock and national wealth, impacting future generations. Studies, including a Cato Institute review, show a negative correlation between federal debt and economic growth, with the CBO estimating a 0.1% GDP growth increase if the debt-to-GDP ratio stabilizes. Without action, GDP growth is projected at a sluggish 1.4%–1.6% for 2025.

A potential loss of investor confidence in U.S. debt could trigger a fiscal crisis, marked by a sharp spike in interest rates or a dollar collapse. This risk is heightened if global investors demand higher yields due to perceived default risks or if political brinkmanship (e.g., debt ceiling disputes) undermines credibility.

The U.S. dollar’s status as the world’s reserve currency is at stake, which could lead to global economic disruptions. Persistent deficits and high debt levels create “fiscal dominance,” where central banks may face pressure to keep interest rates low to ease debt servicing, potentially undermining inflation control.

Inflation has already risen significantly (e.g., 20.9% cumulative increase from 2021–2024), eroding purchasing power and increasing costs for essentials like food (+22.6%), gas (+32.3%), and rent (+24.1%).

Reliance on Printing Cash Flow and Tariffs

To manage the debt burden, there’s a risk the Federal Reserve could resort to printing money (quantitative easing or monetizing debt), which increases the money supply and can fuel inflation. This approach devalues the dollar, potentially eroding its global reserve status and increasing import costs, further driving inflation.

Experts like Ray Dalio warn of a scenario where an oversupply of Treasury bonds meets weakening demand, leading to higher inflation and a weaker dollar. Historically, the U.S. has avoided hyperinflation, but persistent deficits could push the Fed toward policies that prioritize debt servicing over price stability, especially if investor confidence wanes.

The Brookings Institution notes that a fiscal crisis could be avoided if policymakers maintain strong institutions, but political missteps could exacerbate risks. Recent policies, including President Trump’s tariff initiatives (e.g., 25% tariffs on Mexico and Canada, 35% on certain goods), aim to generate revenue and protect domestic manufacturing.

However, tariffs contribute minimally to federal revenue—less than 2% annually—compared to income and social insurance taxes. Tariffs can disrupt global supply chains, increasing costs for consumers and businesses. For example, a 25% tariff on U.S. imports could reduce exports from countries like India, impacting sectors like pharmaceuticals and textiles, and raise prices domestically.

While tariffs may stimulate some U.S. manufacturing, their revenue potential is limited compared to the $2 trillion deficit. Relying on tariffs to offset debt is insufficient, as they cannot replace the need for broader fiscal reforms like spending cuts or tax base expansion. Tariffs increase the cost of imported goods, contributing to inflation.

This compounds the inflationary pressure from potential money printing, creating a double bind for consumers already facing higher prices. The combination of high debt, tariff-driven revenue, and potential money printing creates a precarious economic balance. Tariffs may generate some cash flow but risk economic slowdown and inflation, reducing their net benefit.

Printing money to cover deficits could further weaken the dollar and investor confidence, potentially leading to higher Treasury yields and a self-reinforcing cycle of rising borrowing costs. The U.S.’s ability to borrow at relatively low rates (due to the dollar’s reserve status and domestic debt ownership) provides some breathing room, but this is not unlimited.

Experts estimate a 20–30-year window before fiscal space is exhausted, necessitating urgent reforms. Stabilizing the debt requires spending restraint (e.g., cutting subsidies, reforming entitlements) and revenue enhancements (e.g., closing tax loopholes).

The bipartisan Simpson-Bowles framework is often cited as a model for balancing tax reforms and spending cuts. Avoiding a fiscal crisis depends on credible policymaking. The Fed must maintain independence to control inflation, while Congress needs to address structural deficits.

Investors are advised to diversify into inflation-protected securities or global assets to hedge against dollar weakening or interest rate spikes. Staying informed and advocating for fiscal responsibility can also mitigate risks. While tariffs generate some revenue, their economic costs outweigh their ability to address the deficit.

Relying on printing money risks further inflation and dollar devaluation, threatening long-term stability. Without reforms, the U.S. faces slower growth, higher borrowing costs, and a potential fiscal crisis, though the dollar’s reserve status and domestic debt ownership provide a temporary buffer. The window for action is narrowing, making bipartisan reforms urgent to ensure economic resilience.