The US Debt Is Near $1,000,000 Per American: Where the Money Went and Why It Matters to You

Government Debt Ceiling and Federal Government Shutdown, National Debt Ceiling & USA Credit Worthiness

America has a problem: We, as a country, are in a massive money hole. It’s one of many issues the nation is currently facing and attempting to figure out a solution forward. While many nations frequently struggle to maintain balance in a financial standing with lenders and other countries, the United States is facing a staggering number of $1,000,000 worth of debt per citizen.

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In March 2024, CNBC reported that America’s national debt “…permanently crossed over to $34 trillion on Jan. 4, after briefly crossing the mark on Dec. 29, according to data from the U.S. Department of the Treasury. It reached $33 trillion on Sept. 15, 2023, and $32 trillion on June 15, 2023, hitting this accelerated pace. Before that, the $1 trillion move higher from $31 trillion took about eight months. U.S. debt, which is the amount of money the federal government borrows to cover operating expenses, now stands at nearly $34.4 trillion.”

That is a lot of money and there are not a lot of clear answers as to how to pay it off. Even in an advanced country, which is often seen as the richest and most powerful nation in the world, the path to wiping the slate clean and going back to zero remains murky at best. So where did all this debt come from and how is it going to impact you as a citizen of the United States? GOBankingRates checked in with a few economists to find out.

How Did We Get Here? 

“The U.S. national debt reaching nearly $1,000,000 per American can be a startling figure, but it is essential to break down where this debt comes from and its implications,” said Dennis Shirshikov, a finance professor at the City University of New York.

Shirshikov defined the national debt as the total amount of money that the U.S. federal government owes to creditors, which range from financial institutions, private investors and other lenders across international lines.

“It comprises both public debt, owed to foreign and domestic investors, and intragovernmental holdings, such as Social Security and Medicare trust funds,” Shirshikov explained. “The debt has accumulated over decades due to persistent budget deficits, where government expenditures surpass revenues.”

The rise of high-interest consumer credit options played a huge role for the current balance facing Americans, according to Michael Schmied, senior financial analyst at Kredite Schweiz, who specifically highlighted the role of credit cards, personal loans and those tempting buy-now-pay-later offers as contributors to the nation’s debt.

“They make borrowing money way too easy — and often come with sky-high interest rates,” Schmied said. “This combo has led folks to rack up debt faster than they can pay it off, pushing the average debt per person up to almost $1 million.”

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Where Did All This Money Go? 

Spencer T. Hakimian, founder of Tolou Capital Management, L.P, added that “[a] significant portion of the debt stems from expenditures on Medicare, Medicaid, and Social Security. These programs are essential for providing healthcare and financial support to millions of Americans, especially the elderly and low-income families.”

Other areas of spending included education funding, military and defense, as well as public infrastructure costs. But one of the biggest contributing factors to the U.S. debt? Interest rates. In 2022, the interest payments on the debt were around $400 billion, a jaw-dropping number that is only expected to go up as interest rates rise.

Another good portion of the debt comes from actions that fall under the category of “…governmental fiscal stimulus during tough economic times,” remarked Schmied, asking if Americans “[r]emember those massive stimulus checks and relief packages during recessions?

“They were essential to keeping the economy afloat but came at a cost,” Schmied added. “The government had to borrow huge sums to fund these measures — translating into more debt for the country and, indirectly, for us.”

And it wasn’t just in the economic downturn of a recession, but during a global pandemic that rattled the world in 2020 and contributed to America digging itself deeper in owing money.

“During the COVID-19 pandemic, the government enacted several stimulus measures, including direct payments to individuals and support for businesses,” Shirshikov said. “This increased spending was necessary to prevent economic collapse but added trillions to the national debt.”

Why Should You Care? 

It is crucial for general consumers to understand why this debt matters in the professional opinion of Kenan Acikelli, the CEO of Workhy.

“I’ve noticed that high national debt can lead to higher taxes and reduced public services in the future,” Acikelli said. “I think it can also impact inflation and interest rates, affecting everything from mortgage rates to the cost of goods.”

“High national debt can lead to higher interest rates as the government competes with the private sector for borrowed funds,” said Hakimian, who noted that could bump up the cost to consumers when it comes to things like loans and mortgages.

“Excessive debt might lead to inflationary pressures if the government prints more money to cover its obligations,” Hakimian said. “Inflation erodes purchasing power, making everyday goods and services more expensive for consumers.”

Schmied described how this mountain of debt could mean potential tax hikes down the line.

“The government needs to pay interest on its loans — and if it can’t manage, it might turn to us, the taxpayers,” Schmied said.

Higher taxes could shrink our disposable income, making it harder to save, spend, or invest. This is a big deal for every American household — our financial health could take a hit.

“The nearly $1 million in debt per American is a stark reminder of the financial challenges facing the nation,” noted Ryan Jacobs, the founder and managing partner of Jacobs Investment Management.

“While government spending on defense, social programs, and infrastructure is essential, it is equally important to manage this spending responsibly,” Jacobs pointed out. “For general consumers, understanding the implications of this debt is crucial, as it affects everything from inflation and interest rates to future economic opportunities.”

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