Money · interactive
Why does the national debt snowball?
The United States, modeled on fiscal 2026 and replayed from 2026 to 2056 on a loop. Taxes pour in, interest is paid first, what is left goes to programs, and the shortfall is borrowed onto the pile, which charges interest on itself.
1 See
In fiscal 2026 the United States paid $1.14 trillion in interest, more than it spent on the military. Why does the pile keep growing faster?
2 Change
3 Understand
Model notes and sources
Model. One country, one year at a time, in trillions of dollars. Taxes are 16.7% of GDP and spending before interest is 19.3% of GDP, which reproduces fiscal 2026: receipts $5.4T, outlays $7.4T, deficit $2.0T on a GDP of about $32.4T. The pile is debt held by the public, $32.4T, about 100% of GDP. Each year, interest = rate × pile, and it is paid before anything else; what is left of taxes goes to programs; borrowing = spending − taxes + interest, the shortfall after interest; the pile grows by the borrowing; GDP grows at the growth knob (nominal, so inflation is inside it). The default 3.5% rate reproduces the $1.14T of net interest paid in 2026 ($1.13T in the model). The snowball has two engines: the gap before interest, and the difference between the interest rate and growth. When the rate is above growth, the pile outgrows the economy even with no gap. The film opens on the National Debt Clock in Manhattan, by @newyorkcityclocks; the clock shows gross federal debt, including what the government owes its own trust funds, while the pile in the model is debt held by the public. The numbers come from the model, not from the clip.
Not modeled. The shares of GDP stay fixed, so no policy changes, recessions, inflation surprises or changes in who holds the debt. The average rate on the whole pile moves at once in this model; in reality new rates apply as old bonds roll over, which takes years. The 2036 figures in the film are this model's projection at a 5.5% rate, two points above today's, not a forecast.
Sources. Congressional Budget Office, Monthly Budget Review: September 2026 (fiscal 2026 receipts $5,403B, outlays $7,396B, deficit $1,993B, net interest $1,143B, defense $916B, Social Security $1,654B, Medicare $1,069B, Medicaid $723B); American Action Forum on the Treasury's final Monthly Treasury Statement for fiscal 2026 (debt held by the public about $32.4T, about 100% of GDP; interest about 19% of revenue); the debt-dynamics identity Δ(debt/GDP) ≈ (r − g)·(debt/GDP) + primary deficit, as in any public-finance text (Wikipedia). Concept inspired by Ray Dalio's How the Economic Machine Works.
An ExplainerTools Original. Concept inspired by Ray Dalio’s How the Economic Machine Works.
