The United States has entered troubling economic territory after its public debt officially surpassed the size of its economy, a development that has triggered fresh warnings from major credit rating agencies and intensified concerns across global financial markets.
New figures cited by the Committee for a Responsible Federal Budget show that US debt held by the public climbed to $31.27 trillion, moving above the nation’s annual GDP of $31.22 trillion in March. It marks the first time since World War II that America’s debt load has exceeded total economic output.
The milestone places the United States in a category of its own among wealthy nations widely viewed as safe investment destinations. While several advanced economies carry large debt burdens, America now leads the pack in sheer scale.
Economists warn that rising debt creates multiple risks. Most importantly, the cost of paying interest on that debt can absorb money that would otherwise fund healthcare, infrastructure, defense, education, and other priorities. In addition, investors may begin demanding higher returns to lend money to Washington, pushing borrowing costs upward across the economy.
That pressure could soon grow stronger.
Fitch Ratings said America’s credit outlook remains under strain because of its expanding debt burden and repeated political battles over fiscal policy. The agency currently rates the US at AA+, after stripping it of its top-tier AAA grade in 2023.
According to Fitch analysts, America’s rating already reflects years of declining governance standards, especially in budget management and fiscal policymaking. They added that large structural deficits will likely keep US debt levels far above those of other nations in the same ratings category.
Despite the warning signs, the United States still benefits from the global dominance of the US dollar, deep financial markets, and long-term economic strength. Those advantages continue to support confidence in Treasury securities, even as debt grows.
However, fresh projections paint a difficult path ahead.
Fitch estimates the general government deficit could hit 7.9% of GDP this year and again in 2027. Analysts linked the outlook partly to deep tax cuts under Donald Trump’s One Big Beautiful Bill Act, alongside uncertainty over whether tariff revenues can offset revenue losses.
The Committee for a Responsible Federal Budget previously estimated that Trump’s signature policy package may add $4.7 trillion to national debt through 2035.
At the same time, the Supreme Court’s earlier ruling against many Trump-era tariffs may reduce expected federal revenues by $1.7 trillion through 2036. If current trends continue, total US debt could rise to $58 trillion over the next decade.
For ordinary Americans, credit downgrades carry real consequences.
A weaker sovereign rating often forces governments to pay higher interest rates. That pressure can spread quickly into mortgage costs, business loans, car financing, and corporate borrowing. In simple terms, when Washington pays more to borrow, households and businesses often do the same.
Moody’s has also raised red flags. Last year, the agency downgraded the US from Aaa to Aa1, citing widening deficits and soaring interest payments.
Moody’s said entitlement spending is likely to rise over the next decade while government revenue remains relatively flat. As a result, deficits may stay large and debt servicing costs could climb further.
The warnings from Fitch and Moody’s send a clear message: America still enjoys enormous economic strength, but its debt path is becoming harder to defend.
For global markets, investors, and emerging economies that depend on US stability, the stakes are high. When the world’s largest economy struggles with debt discipline, the ripple effects reach every continent.
This story was originally featured on Fortune.com
