The borrowing that never stops
To understand why the dollar keeps leaking, follow the debt.
Picture a household
Imagine a family that borrows to pay its bills. Next year it borrows again, this time to cover the bills and the interest on last year’s loan. Each year the loan gets bigger, and so does the interest.
That is roughly how the U.S. government runs today.
How big it is
$40.6 trillion
owed by the U.S. federal government. To the penny: $40,593,637,262,883.48.
Source: U.S. Treasury, Debt to the Penny, as of October 29, 2026.
The interest alone
Borrowed money costs interest, and the government pays it every year.
$1.05 trillion
spent on interest in fiscal year 2026. That is more than the $965 billion spent on national defense. Only Social Security and Medicare cost more.
Source: U.S. Treasury, Monthly Treasury Statement, Table 9, as of fiscal year 2026 (ended September 30, 2026).
Social Security$1.67 trillion
Medicare$1.07 trillion
Interest on the debt$1.05 trillion
Health$1.03 trillion
National defense$965 billion
Income security$694 billion
Source: U.S. Treasury, Monthly Treasury Statement, Table 9, as of fiscal year 2026 (ended September 30, 2026).
Growing faster than the economy
A fair way to judge debt is to compare it with income. For a country, that income is its GDP (gross domestic product)The total value of everything a country produces in a year. Comparing debt to GDP is like comparing a household’s debt to its yearly income.See the glossary, the value of everything it produces in a year.
Line chart. Debt was 40.34% of GDP in Q1 1966 and 121.19% in Q2 2026. The full data is in the table below the chart.
Source: OMB and St. Louis Fed, FRED series GFDEGDQ188S, as of Q2 2026.
Show the numbers
| Quarter | Debt as % of GDP |
|---|---|
| Q1 1970 | 35.4% |
| Q1 1975 | 31.5% |
| Q1 1980 | 30.9% |
| Q1 1985 | 40.4% |
| Q1 1990 | 52.0% |
| Q1 1995 | 64.7% |
| Q1 2000 | 57.7% |
| Q1 2005 | 60.9% |
| Q1 2010 | 86.5% |
| Q1 2015 | 100.5% |
| Q1 2020 | 106.8% |
| Q1 2025 | 120.0% |
| Q2 2026 | 121.2% |
Who lends the government all this money
Most of the debt is bought by ordinary investors, banks, and other countries. But when times get hard, the Central bankThe institution that manages a country’s money and sets key interest rates. In the U.S. it is the Federal Reserve, created in 1913.See the glossary steps in. It buys government debt and pays with brand-new money. It doesn’t need to have the money first. It creates it with a few keystrokes.
$9.0 trillion
owned by the Federal Reserve at its peak in April 2022, much of it government debt. In 2007, it owned about $875 billion.
Source: Federal Reserve, total assets (via FRED), as of October 28, 2026.
What the Federal Reserve owns, 2002–2026
Mostly government debt and mortgage bonds, bought with newly created money.
Line chart. The Federal Reserve held about $875 billion in assets in 2007. Holdings jumped after 2008 and again in 2020, peaking at $9.0 trillion in April 2022. They are $6.7 trillion now. The full data is in the table below the chart.
Source: Federal Reserve, total assets (via FRED), as of October 28, 2026.
Show the numbers
| Date | Total assets |
|---|---|
| January 2003 | $0.73T |
| January 2005 | $0.82T |
| January 2007 | $0.87T |
| January 2009 | $2.12T |
| January 2011 | $2.44T |
| January 2013 | $2.92T |
| January 2015 | $4.50T |
| January 2017 | $4.45T |
| January 2019 | $4.06T |
| January 2021 | $7.33T |
| January 2023 | $8.51T |
| January 2025 | $6.85T |
| October 2026 | $6.75T |
That is about 10 times as much in 15 years. Today the Fed owns $6.7 trillion. This is one big source of the new money from the last stage.
Why it can’t simply be paid back
There are only a few ways out. The government could raise taxes a lot. It could cut spending a lot. Both are painful, and voters punish whoever tries.
The easier path is to keep borrowing and let new money do the work. When more dollars are created, each one is worth less. Old debts get smaller in real terms. The cost doesn’t disappear, though. It is paid by everyone who holds dollars, through higher prices.
Not about one party, or one country
Both major parties have added to the debt when they held power. And this isn’t only an American story. Many countries borrow heavily and let their money lose value over time. The pattern comes from the system, not from any one leader.