The United States now faces a major challenge: in the coming 12 months, it must find buyers for $9.2 trillion in its debt—about a quarter of its total federal debt. The roots of this situation trace back to the COVID pandemic and subsequent policies involving short-term borrowing. The US government issued short-term bonds (1-2 years) to save on interest at the time, but this has created present difficulties, as these bonds regularly require refinancing at increasingly higher rates.
The average interest rate on US government debt has reached 3.4%, its highest since 2008. This means increased costs, with annual debt servicing now exceeding $1 trillion. Demand for US government bonds is dwindling: China and Japan, once among the principal buyers, have reduced their holdings, and overall global investor confidence is hurt by political instability and geopolitical risks.
To attract buyers, the US must offer even higher rates, which boosts costs further. Political deadlock in Congress only makes matters worse: Democrats and Republicans cannot agree on basic priorities like raising the debt ceiling, cutting expenditures, or reforming taxes. Proposed reforms, such as tax policy changes, are adding to the debt burden.
Experts note that a large national debt is not in itself a crisis—many developed countries have debt-to-GDP ratios over 100%. However, strategic missteps in the structure and rates of US debt have led to greater reliance on market sentiment. Past financial decisions have limited maneuvering room and forced a search for new refinancing approaches. Economists stress that the US needs to solve these issues soon to avoid financial shocks.