Why Does the U.S. National Debt Increase so Much Every Year?


Quick Answer

The U.S. national debt has steadily increased since 1971 due to several factors, including overspending and the country's increasing elderly population. The debt began to rise significantly when President Nixon moved the dollar away from the gold standard and continues to rise because legislators add items to the federal budget to benefit wealthy donors and special interest groups.

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Full Answer

The U.S. national debt is primarily increased when the government spends more money than it makes in tax revenues and has been driven by entitlement spending and increases in defense spending. In addition to these factors, legislation that benefits donors and large corporations reduces government tax income and contributes to debt.

While some of the debt is held by foreign countries such as Japan and China, a large part of the national debt is owed to other government entities, including the Social Security trust funds. The Federal Reserve has kept interest rates low to reduce the amount owed on the national debt, but spending has continued to outpace revenues, so the total debt amount has continued to rise.

The national debt is projected to continue increasing as the "baby boomer" generation moves toward retirement, since greater demand on resources such as Medicare and Social Security requires the government to increase spending.

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