Questions by kids: What is national debt, and what happens if it isn’t paid off

Learning is all about asking questions, and children ask the best questions. Boise State is home to more than 1,400 faculty members and researchers who are eager to answer these amazing questions.

Anne Walker, chair of the Economics Department

Today, Boise State Economics department chair Anne Walker answers a child's question: "What is national debt, and what happens if you don't pay it off?"

At Boise State, Anne Walker is the chair of the economics department and teaches classes on macroeconomics and international economics. Walker received her doctorate in economics from West Virginia University in May 2013, and her master's in business administration from the University of Kansas in 2003.

Walker researchers the effects of resource dependence on long-run economic growth across counties in the Appalachian region, and how this relationship is influenced by educational attainment.

First, what is national debt?

This chart by the Congressional Budget Office depicts the historic rise and fall of national debt in the US since the 1790s. The debt is shown as GDP (Gross Domestic Product), or as Walker explains "a percent of the total income of the country. The reason it is shown this way is because if we see the debt as a ratio to your income, it gives you an idea of the ability of the country to pay back its debt."
For example, the average income of a household (a household could be one person or a whole family) is $83,730, as of the 2024 Annual Social and Economic Supplement (ASEC)
Predicted over the next two decades, growing deficits push federal debt to 175 % of GDP.

The national debt is the cumulative amount of money that the government owes since it began in 1776, Walker said.

Right now, the US national debt is the highest it has been since WWII - as of Sept. 30, 2026, it is $40,105,601,305,760 and rising.

If you were to divide this debt and give an equal piece to every American, each person would have $117,499 in debt.

One interesting thing about government debt compared to the debt of a person or a household is that a government doesn't die: it lives on in perpetuity. So a government never has to completely pay off its debt, and that's fine.

But we do have to worry about it getting too large.

How does a nation go into debt?

Every year, the government spends a lot of money, Walker said, and the main things that the government spends money on are health care programs (like Social Security, Medicare, Medicaid), and the military. Many of those expenses are required, based on laws passed by Congress. We call that mandatory spending.

To fund all of that spending, the government collects taxes on people's income and on business's income (called corporate taxes). These are the main two sources of taxes.

Who else does the US government borrow money from?

The government borrows money from almost everybody and anybody, Walker said. One-third of the money borrowed comes from foreign entities, largely Japan and the United Kingdom. The other two-thirds are U.S. entities.

To borrow money, the U.S. sells treasury bonds, which is just a fancy word for a loan.

The government takes out loans from anybody who's willing to loan them money. Loaning money to the U.S. government through treasury bonds is very common in the world of finance, because U.S. government bonds are seen as extremely safe.

Why? Because the U.S. government has never before defaulted on its debt (except for a weird technical default when President Franklin Delano Roosevelt switched away from the gold standard). That's a story for another time.

Defaulting on a debt means not paying it back.

Why is the national debt so high now?

Before the 1980s, the main cause of high debt and government deficits (or the difference between the money the government spends and makes) was war. After the 80s, it became mostly increased government spending for social safety net programs, like Social Security, Medicare and Medicaid.

The US National Debt is growing at an prodigious rate.

There was also a big jump in military spending due to 9/11, and then more recently in government response due to the Great Recession and COVID-19.

Also, we are not only paying off the debt, but the interest on the debt. According to the Peter G Peterson Foundation, interest is the fastest growing part of the federal budget, and it's $2.8 billion EVERY DAY.

Right now, economists say the national debt is on an unsustainable path because of multiple factors, especially:

1. National healthcare programs such as social security, medicare and medicaid cost more because people have longer life expectancy, and medical care is more expensive in the U.S. than anywhere else in the world.
2. 10,000 people will turn 65 every day through 2030. That means many retirees will be added to national health care programs with fewer people working and paying into those systems.
3. Our tax system doesn't bring in enough money to handle the deficit.

Why is high national debt a problem?

National debt pushes interest rates up, so it becomes much more expensive for people who want to borrow money to buy a house, start a business or get a loan for anything.

Government borrowing rates affect rates across the whole economy for everybody on all loans, so that can slow economic growth.

Also, with enormous debt, there is less money to respond to national disasters, build and maintain infrastructure or improve social security nets that serve vulnerable people struggling with illness, homelessness, joblessness and so on.

What do you think would be the fastest way to lower the national debt?

I would want to look at it on a program-by-program basis, Walker said, starting with Social Security. There has been some political alignment on one potential way to fix Social Security, and that's raising or removing the cap on income and changing how the benefits are paid.

When you look at Social Security in a little bit more detail, it's interesting because it's designed as a flat tax. That means that everybody pays the same percent on their earnings. We all pay 6.2% of our paycheck and our employer pays 6.2%.

You pay Social Security taxes based on your earnings, up to $184,500. That's very different from income tax, where the tax rates change depending upon how much money you make.

The social security tax system was written that way to get the program passed politically, and it's about fairness: "the amount you get out is relative to the amount you put in."

But that has resulted in a system that led to today's national debt. Some people get millions of dollars in social security income, and that's not sustainable.

I think that raising or removing the cap on income and changing how the benefits are paid would be the fix that might have the biggest bang for the buck.

Bonus question: Has the U.S. ever paid off all its national debt before?

Yes, in 1835, but it only lasted one year! Read all about how President Andrew Jackson (the seventh U.S. president) aggressively got the national debt to $0, and how it backfired, from NPR.

References and reading

Congressional Business Office Report Highlights America's Unsustainable - and Deteriorating - Fiscal Outlook

The Budget and Economic Outlook: 2026 to 2036

The social security funding gap and how to fix it

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