The United States has crossed a new milestone in its finances, with its national debt reaching a record $37 trillion, the highest in the world. Despite this massive burden, America continues to remain the world’s largest economy. Experts say this is due to the country’s steady economic growth, the special role of the US dollar, and the way its debt is structured.

America’s debt is now bigger than its economy. The debt-to-GDP ratio has risen above 119 percent, meaning the country owes more than the value of everything it produces in a year.

By mid-2025, US GDP stood at around $30.3 trillion. At the same time, debt is growing fast, by nearly $1 trillion every five months. Out of the total $37 trillion debt:

  • $24.4 trillion is public debt owed to investors, funds, and foreign governments.

  • $7.3 trillion is intragovernmental, such as Social Security and Medicare funds.

  • The Federal Reserve holds about $4.6 trillion in US Treasuries.

Japan is the largest foreign lender with $1.1 trillion in US debt. It is followed by the UK ($809 billion), China ($756 billion), the Cayman Islands ($455 billion), and Canada ($426 billion).

Paying interest on this huge debt is becoming a heavy burden for the US government. In 2024 alone, interest payments reached $880 billion, more than what the country spends on Medicare or defence.

Interest rates on government borrowing have also climbed, from about 1.6 per cent in 2022 to 3.35 per cent in mid-2025. This rise has raised concerns, with Moody’s even downgrading America’s credit outlook due to rising deficits.

Why the US economy still stands strong

The strength of the US dollar plays a key role in keeping the American economy stable. Since the dollar is the world’s main reserve currency, countries and investors across the globe continue to buy US Treasury securities, which are seen as safe and reliable.

Much of the US debt is also held domestically in pension funds and financial institutions, reducing dependence on foreign investors.

Steady economic growth has further helped the US prevent its debt ratio from spiraling out of control.

History shows America has bounced back from major crises like the 2008 financial crash and the COVID-19 pandemic by using strong fiscal and monetary measures. But risks remain.

The Congressional Budget Office (CBO) projects that public debt could rise from 99% of GDP in 2024 to 116% by 2034, and even 172% by 2054 if current trends continue. Consultancy firm EY has warned that if debt growth is not checked, it could:

  • Reduce economic output by $340 billion by 2035

  • Led to 1.2 million job losses

  • Cut private investment by nearly 14%

  • Lower wages for workers

Analysts say an immediate collapse is unlikely. America’s financial system is still among the most trusted in the world, and its ability to borrow remains strong because of global trust in the dollar.

For now, the US maintains its dominance thanks to its currency, strong economy, and deep financial markets. But experts caution that prudent fiscal management will be crucial to stop debt from dragging down future economic growth.