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Published: Dec 15, 2022 7 min read
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Rangely García for Money

This is an excerpt from Dollar Scholar, the Money newsletter where news editor Julia Glum teaches you the modern money lessons you NEED to know. Don't miss the next issue! Sign up at money.com/subscribe and join our community of 160,000+ Scholars.

You know that idiom “don’t borrow trouble”? Yeeeah, I don’t live that way.

At any given moment, I am worrying about 1 million things: my family, my job, the recipe I’m making for dinner, whether I should capitalize my Instagram captions, whether I’m saving enough for retirement, how Pete Davidson is doing, how to make my teeth whiter, if I talk too much, if I talk too little, what people from high school think of me, what I’m going to do with my life, etc.

I borrow trouble all over the place, and lately, I’ve added the national debt to the list. It seems like every time I read a headline about how President Joe Biden touted the largest one-year drop in the federal deficit in American history, I immediately see another story about the “grim financial milestone” of the national debt crossing $31 trillion.

That doesn’t seem ideal — but I can’t figure out just how stressed I should be about it. Like, should the national debt rank above or below “the possibility that Nick Jonas is going to break up the band again” on Julia’s Infinite List of Anxieties?

Do I need to worry about the national debt?

Howard Yaruss, author of Understandable Economics, says the reason we have a national debt is because the federal government needs to spend money to achieve its goals, like providing unemployment benefits or building bridges. But there’s not enough revenue from sources like taxes coming in.

Revenue minus expenses equals the deficit.

To deal with the deficit, the government needs to constantly be borrowing funds. The primary way it does that is by selling securities like Treasury bonds, bills and notes — which basically amount to “an IOU: Someone gives the government money, and the government promises to pay them back back down the road,” Yaruss says.

Kinda like my credit card bill, but on a bigger scale.

People usually talk about the deficit in annual terms; that’s what all those recent headlines are about. The Treasury Department is saying that the deficit for the 2022 fiscal year (which ended Sept. 30) was $1.38 trillion. That’s a victory in the White House’s eyes, because the deficit was $2.8 trillion the year before.

When we add up all those annual deficits, or IOUs, we get a truly eye-popping figure: the figure that, in early October, surpassed $31 trillion.

The deficits — and, in turn, the national debt — are affected by what’s happening with the American population and how the government chooses to respond to it.

Take the pandemic, for example. When Congress passed laws like the CARES Act to help people through the early days of the COVID-19 crisis, it racked up huge bills. According to the Washington Post, the three rounds of stimulus checks alone piled $800 billion on the national debt.

Different parts of that $31 trillion are owed to different entities. About 78% of the debt is held by the public, largely in the form of Treasury securities like bills, bonds and notes, says Tori Gorman, policy director for The Concord Coalition, a nonpartisan organization focused on budget issues. The rest of it is, “believe it or not, [money] the federal government actually owes itself,” she says, adding that a big part of that is linked to Social Security.

And that’s to say nothing of the interest we owe.

“$31 trillion is about the size of our economy,” Gorman says. “We’re in debt up to our eyeballs … we've got to service this debt, we need to pay the interest on the debt that we have issued, and we need to pay back that principal at some point.”

That’s important, Gorman says, because it’s an opportunity cost: When we send our tax dollars to the government, and the government uses them to pay off bonds, it’s redirecting money that could be used for building roads and bridges, increasing Pell Grants, rolling out universal Pre-K or “putting astronauts on the moon.”

She says it also can reduce the flexibility we have to respond to crises and make us beholden to foreign investors.

In addition, according to a 2020 report from the Congressional Budget Office, it “makes the economy more vulnerable to rising interest rates and, depending on how that debt is financed, rising inflation.” It also “raises borrowing costs, slowing the growth of the economy and national income.”

So, um, it’s a problem. The thing nobody agrees on is just how big of a problem it is. Yaruss says he likes to think about how much debt per person the $31 trillion is because it’s such a big number to comprehend. Divided by 332 billion Americans, the debt is roughly $90,000 per person.

In his view, that’s not a “the-sky-is-falling” type situation. In others', it is.

The bottom line

The national debt is huge. But the degree to which I should totally freak out depends on my political views and priorities.
If I feel compelled to take action, Gorman recommends voting (of course) and pressing candidates on how they plan to pay for their policies.

“The government isn't some entity that we’re not part of — it’s us,” Yaruss says. “That’s why we should care.”

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