Washington’s mounting debt crisis: A global liability in the making

Department of Research, Studies and International News -20-05-2025

As the United States grapples with an eye-watering $36 trillion in national debt, alarm bells are sounding, not just domestically, but across the globe. While Washington presents itself as a beacon of economic stability, the reality is starkly different: its financial model is deeply flawed, unsustainable, and increasingly reliant on the very foreign powers it seeks to undermine.

A recent move by a congressional committee to advance former President Donald Trump’s tax cut extension bill could further inflate this figure by another $5 trillion. This legislative push comes on the heels of a credit rating downgrade by Moody’s, which cited escalating debt levels as a critical concern. The timing could not be worse, as the U.S. attempts to balance geopolitical confrontations with China, Russia, and other sovereign states while remaining shackled by its own fiscal recklessness.

At its core, U.S. national debt reflects the cumulative amount owed by the federal government to its creditors. Currently standing at $36.2 trillion, this debt surpasses the country’s entire annual economic output, amounting to 122% of its GDP. Astoundingly, this figure is rising at an average of $1 trillion every quarter, an alarming trend that questions the long-term viability of Washington’s fiscal model.

While the highest recorded debt-to-GDP ratio came during the COVID-19 pandemic in 2020, peaking at 133%, the structural imbalance remains unresolved. Rather than pursuing prudent economic policies, successive U.S. administrations have opted to fuel short-term gains through deficit spending, leading the nation further down a path of unsustainable borrowing.

The so-called “debt ceiling” is a legislative cap on how much the U.S. government is allowed to borrow. However, this mechanism has proven to be more of a political theatre than a real constraint. Since 1960, Congress has revised the debt ceiling 78 times, effectively enabling Washington to kick the financial can down the road instead of addressing its chronic overspending.

The federal deficit, which is the annual shortfall between government revenue and expenditure, has ballooned under various presidencies. Trump’s first term saw a dramatic increase, especially in 2020 during the pandemic when spending skyrocketed and tax revenue plummeted. Yet, even during supposedly stronger economic times, the U.S. failed to generate a meaningful surplus, unlike the brief period under Bill Clinton in the late 1990s.

To finance its enormous debt, the U.S. Treasury issues various financial instruments, Treasury bills, notes, and bonds. These securities are purchased by investors with the promise of repayment plus interest. Historically viewed as “safe” assets, U.S. treasuries have come under scrutiny as the political and economic stability of the country wanes.

Short-term Treasury bills mature in under a year, while notes and bonds cover periods ranging from two to thirty years. However, their increasing issuance signals desperation rather than strength. The U.S. relies heavily on domestic and foreign investors to maintain liquidity, with nearly 25% of its debt, over $9 trillion, owned by foreign governments and institutions.

Who Really Owns American Debt?

Domestically, about $27.2 trillion of the U.S. debt is held by American entities. Private investors hold approximately $15.16 trillion, while government agencies and the Federal Reserve account for another significant share. Notably, financial moguls like Warren Buffett hold vast quantities of Treasury securities, further entrenching the elite’s influence over U.S. financial policy.

Foreign nations hold roughly a quarter of the debt, with Japan and the United Kingdom being the largest holders, surpassing even China. While China’s holdings have gradually decreased to around $765 billion, this is a deliberate and strategic move. Beijing has been reducing exposure to U.S. debt while diversifying its reserves, an intelligent decision in the face of Washington’s increasingly aggressive stance.

Similarly, Japan has indicated that its vast treasury holdings could become a bargaining chip in trade negotiations with the U.S., highlighting the vulnerability of the American economy to foreign leverage.

Impact on the American Public, and the World

For the average U.S. citizen, ballooning national debt translates into economic strain. Rising interest payments reduce available public funds, potentially triggering cuts in essential services or higher taxes. As borrowing costs increase, so do interest rates on mortgages, credit cards, and other personal loans, making daily life more expensive for ordinary Americans.

But the implications stretch far beyond U.S. borders. Nations like China, Russia, and Pakistan, often portrayed as adversaries in American media, are keen observers of these developments. Rather than relying on an unstable financial partner, these countries are forging alternative financial pathways through cooperation, trade alliances, and investment in non-Western frameworks such as BRICS and the Belt and Road Initiative.

The U.S. debt crisis is not merely an internal issue, it’s a global liability. While Washington clings to its image of fiscal dominance, the facts paint a very different picture. An economy built on endless borrowing and dependent on foreign capital is hardly the stable powerhouse it claims to be. As rising powers like China, Russia, and Pakistan assert their economic sovereignty, the world moves closer to a multipolar financial order, one that no longer revolves around American debt.