National debt/deficit to GDP

In 2025, the national debt to GDP ratio is anticipated to grow by 1.0%, reaching 123.5%. The growth is largely attributable to enhanced federal funding aimed at bolstering social services and the defense sector, which significantly impacts the debt-to-GDP ratio. Meanwhile, the GDP has faced challenging conditions because of the initial and subsequent impacts of tariffs, alongside the extended repercussions following economic shocks absorbed during ongoing trade negotiations led by the Trump Administration. Also, the resumption of student loan payments for defaulted loans in May 2025 will offer some revenue as these may be garnished by the federal government, thereby modestly reducing the deficit.

Over the five-year period from 2020, the national debt to GDP ratio underwent significant changes prompted by the COVID-19 pandemic and its economic consequences, which necessitated unprecedented fiscal stimulus through the Families First Coronavirus Response Act and the CARES Act. As unemployment soared, government tax revenues plummeted, leading to a sharp uptick in federal debt to fund rising deficits. As pandemic conditions stabilized, the enactment of the American Rescue Plan Act in 2021 contributed to debt-to-GDP ratio reductions, with pandemic-related spending declining and government revenues showing marginal improvement. The period was characterized by successive GDP growth trajectories, even amid recession fears sparked by increasing interest rates. Inflation, influencing GDP in nominal terms, also contributed to perceived debt reductions by temporarily inflating economic activity metrics. Yet, national spending expanded under the Biden Administration, notably through initiatives like the Infrastructure Investment and Jobs Act of 2021, which boosted long-term project spending, thereby maintaining elevated expenditure levels. Such spending dampened potential debt ratio declines, as increased project funding commitments undercut reductions in the federal debt to GDP ratio. Overall, this convergence of fiscal policy actions resulted in a measured decline in the debt-to-GDP ratio, achieving a CAGR of 0.4% between 2020 and 2025.