The U.S. national debt just crossed a once-unthinkable threshold on the way toward breaking the record set in the wake of World War II: It now exceeds 100 percent of America’s gross domestic product.
As of March 31, our publicly held debt was $31.27 trillion, while America’s GDP in 2025 was $31.22 trillion. This puts the ratio at 100.2 percent, compared with 99.5 percent when the last fiscal year ended September 30.
That 100.2 percent figure will likely climb, because the federal government is running historically large annual deficits of nearly 6 percent of GDP, which add to the debt. The final tally will depend on Iran war spending, tariff refunds, and the strength of the economy.
Should you worry? Well, it’s not as if we’re heading into a depression. Passing the 100 percent threshold won’t suddenly cause the world to lose confidence in the dollar.
The real problem is that an increasing portion of our nation’s budget — and your tax dollars — is dedicated to paying interest on this growing debt. That’s money we don’t spend on education, healthcare, roads and bridges, social safety nets, or (if we actually needed more spending on it) national defense.
As the debt continues to grow, interest payments continue to soar. We’ll soon be paying more in interest on the federal debt each year than we spend each year on Medicare.
So, who exactly receives these interest payments? This is an issue you hear very little discussion about, because the wealthy and powerful of this country would rather you didn’t know.
You probably do hear that a chunk of our debt is held by foreign governments and foreign investors. That’s true, but they hold only about 30 percent of our debt. The rest — roughly 70 percent — is held domestically. That is, we pay the interest to ourselves.
And who, exactly, is the “ourselves” who receive these interest payments? The Federal Reserve holds part of this debt, state and local governments hold part.
But the biggest chunk — nearly half — is held by mutual funds, pension funds, insurance companies, and banks. And who owns them? The Americans who invest in these funds — and who thereby, directly or indirectly, hold Treasury bills.
And who, exactly are these Americans — the Americans who are directly or indirectly collecting a large amount of the interest we’re paying on the national debt? It’s the people at the top.
The richest 1 percent of U.S. households hold about 35.6 percent of all financial assets — shares of stock, corporate bonds, and Treasury bills — so it’s safe to assume they hold at least a third of all Treasury bills.
What’s wrong with this picture?
Here’s where things get really interesting.
Decades ago, wealthy Americans financed the federal government mainly by paying taxes. Their tax rate was far, far higher than it is today. In the 1950s, under President Dwight Eisenhower, the richest Americans paid a marginal tax rate of 91 percent. (Tax deductions and tax credits meant that the top effective marginal rate was lower than this.)
Fast forward. Now, wealthy Americans finance the federal government mainly by lending it money and collecting interest payments on those loans.
Interest payments on the national debt this year are expected to reach $1 trillion.
There are roughly 128 million households in the United States. Dividing $1 trillion in annual interest among U.S. households would amount to $650 per household per month. (This is a simplified average, of course; actual burdens vary based on tax status, income, and spending.)
The point is that a big chunk of the growing interest payments American taxpayers make on the federal debt is going to wealthy Americans.
Keep following the money. One of the biggest reasons the federal debt has exploded is that tax cuts — starting with the George W. Bush administration in 2001 and extending through Trump’s 2018 and 2024 tax cuts — have reduced government revenues by $10.6 trillion.
Most of the benefits from those tax cuts are going to the wealthy. Since 2000, 65 percent of the benefits from tax cuts have gone to the richest fifth of Americans — 22 percent to the top 1 percent.
So, you see what’s happened?
The wealthiest Americans used to pay higher taxes to finance the government. Now, the government pays wealthy Americans interest on a swelling debt, caused largely by lower taxes on wealthy Americans.
Which means a growing portion of everyone else’s taxes are now paying wealthy Americans interest on those loans, instead of paying for government services everyone needs.
So, from now on, whenever you hear someone say how huge, horrible, and out-of-control the national debt is, explain to them that it’s because of tax cuts to the wealthy — who are also the major recipients of interest on that debt.
America’s wealthy have never been wealthier. If they paid their fair share of taxes, we wouldn’t have such a huge federal debt. And we wouldn’t be paying them so much interest on that debt.
Know what’s happened, and pass it on.
Robert Reich is a professor of public policy at Berkeley and former secretary of labor. His writings can be found at https://robertreich.substack.com/.
