The United States has a massive federal debt that’s growing quickly.
Because U.S. Treasury securities mature at different times (between one month and 30 years), investors must repeatedly step up and buy more Treasurys to replace ones that matured.
So far, the United States has been able to finance its overspending by selling its debt. But what if the day comes when other countries or U.S. companies are no longer willing to lend the country their money?
That shift may not be far off.
Size of Problem
As of March 2026, the gross federal debt was $39 trillion.
About $31 trillion of that is held by the public, which is about the size of the total U.S. gross domestic product.
Another $7.6 trillion is intergovernmental debt, such as the money borrowed from the Social Security and Medicare trust funds and replaced with IOUs.
That debt is growing fast because the federal government spends much more than it takes in every year.
The 2025 federal deficit was $1.78 trillion, only slightly lower than $1.83 trillion during 2024, President Joe Biden’s last year in office.
And while the deficits in 2022 and 2023 were a little lower, the deficit for the last year of President Donald Trump’s first term (2020) was $3.14 trillion, and the first year of Biden’s presidency (2021) was $2.77 trillion — both related to increased pandemic spending.
The Trump administration has promised to reduce the annual deficits, but the Congressional Budget Office doesn’t think that will happen.
It’s predicting that, under current law, over the next 10 years, the annual deficit will grow from $1.85 trillion in 2026 to $3.1 trillion in 2036, leaving the country with a $56 trillion debt. And that’s before we face the financial fallout from the war with Iran and its aftermath.
While Trump and his advisers suggest that tariffs will cover the budget gap, the numbers just aren’t there; tariffs raised about $175 billion in 2025, and the deficit was still 10 times that figure.
And it’s not just the U.S. While U.S. government debt is about 123% of GDP, Japan’s is 199%, and several large economies have federal debt close to 100% of GDP.
Who Buys Debt?
There is a perception that other countries are the primary buyers of U.S. debt. Not true.
Americans — individuals, companies, pension funds — own about 80% of U.S. debt. Foreign countries finance the rest.
China used to be the largest holder of U.S. debt, but it is intentionally scaling down, with the government reportedly telling Chinese banks to reduce their holdings, reports Bloomberg News.
According to the Treasury Department, at $1.185 trillion, Japan was the primary foreign holder of U.S. debt at the end of 2025, followed by the United Kingdom ($866 billion), China ($683 billion), Belgium ($477 billion), and Canada ($468 billion).
However, the Treasury lists Hong Kong’s $268 billion separately from Mainland China. Add it to China’s holdings and it totals $951 billion, which would put China in second place.
Will other countries continue buying U.S. debt? Probably, but clouds are forming.
The New York Times writes, “Investors are increasingly souring on the United States, as illustrated by the declining dollar, the stalled stock market and rising government borrowing costs.”
That souring trend is referred to as “Sell America,” meaning investors are considering switching to foreign stocks and bonds.
What happens if there is little interest in buying U.S. debt? The Treasury Department must push up interest rates to attract buyers, which makes the national debt problem worse. Annual interest on the national debt just passed $1 trillion.
The good news is that foreigners are still buying U.S. debt — at least for now — with Bloomberg reporting at the end of February that U.S. bonds had their biggest monthly rally in a year.
Competition for Investment Dollars
The U.S. Treasury is facing another competitor for investors’ funds: large tech companies.
As CNBC reports, “Hyperscalers are significantly ramping up their AI capex spending — and increasingly using credit markets to fund it.”
How much spending are we talking about? Perhaps up to $770 billion in 2026 on AI and building data centers.
The plan is to go to debt markets to fund that spending. And that money could be tied up for years. For example, Amazon has just introduced a 100-year bond.
That development has BlackRock, Inc., the world’s largest asset manager, warning: “The problem: rising corporate borrowing adds supply to bond markets struggling to digest large public deficits.”
The real question is whether investors, both domestic and foreign, begin to perceive the debt being offered by huge, financially stable and solvent companies like Meta, Alphabet, and Amazon as safer than U.S. debt.
Can Washington Control Spending?
Will investors continue buying U.S. debt? They have so far, and they may continue no matter how large the federal debt is.
But prudent political leaders need to recognize the potential peril that would arise if investors decided to invest elsewhere.
To avoid that calamity, we need to reduce federal deficits. And we do that in two ways: spurring economic growth while cutting spending.
We may not be able to grow our way out of our debt crisis, but we can certainly reduce the debt-to-GDP ratio we have now.
First, the country needs pro-growth economic policies.
The One Big Beautiful Bill is just such a policy — mostly. It provides tax cuts — like on tips and overtime — which is great for the people who can take advantage of those breaks, but they don’t spur economic growth.
To do that, you need tax breaks that encourage employers to invest and hire. The OBBB made permanent the corporate tax breaks passed in the Tax Cuts and Jobs Act of 2017. That was a very pro-growth step.
Second, Congress needs to cut spending. Efforts to root out fraud in U.S. entitlement programs will help, but it won’t be enough to eliminate a nearly $2 trillion annual deficit.
Other changes will have to occur. Voters will have to hold their elected representatives accountable.
If political candidates campaign on cutting spending, and most Republicans do, hold their feet to the fire. Tough choices will have to be made, but we won’t significantly reduce the budget deficit until Congress gets spending under control.
And it must be done before it’s too late. If investors decide the size of the U.S. debt is too large and therefore too risky, it will be hard for Washington to regain their confidence.
Source: Newsmax | May 2026