Argus

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Apr 21, 2026

Summary

Looming behind the U.S. War in Iran, which begins its eighth week with no end in sight, is the high level of U.S. debt. According to the Department of the Treasury, federal debt at the end of 2025 totaled $38.5 trillion, up 6% over the past year (during an economic expansion) and higher by a whopping 65% since January 2020. In the context of the overall economy, total U.S. debt is now about 123% of GDP, according to the Office of Management & Budget. That is the highest level since World War II. In the 1970s and 1980s, the debt/GDP ratio was consistently in the 30%-40% range and moved up toward 60% by 2000. Debt soared around 2010, as the government spent aggressively to halt the Great Recession and rekindle growth. Yet despite more than 10 years of economic growth prior to the pandemic, debt only increased as a percentage of GDP. Since 2020, spurred by the fiscal spending allocated to fight the impact of COVID-19, debt levels surged further, peaking in 4Q20 at 125%. This is not a problem that has to be fixed today (Japan's current debt-to-GDP ratio is around 250%), but we do note that interest expense now accounts for 3.9% of U.S. GDP, up from 2.3% in 2020 and compared to the historical average of 3.0% and a high of 5.0% in 1991. That's going to crowd out other government-spending initiatives that could promote GDP growth. Ideally, politicians should

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