The U.S. national debt has blown past $40 trillion, hitting the milestone months ahead of Congressional Budget Office projections. The early arrival is partly due to tariff refunds inflating the deficit. In March, the debt held by the public matched the size of annual GDP, nearing the all-time peak from the World War II era.
These numbers have reignited calls for austerity, but analysts argue the country is far from broke. In fact, the nation's private wealth dwarfs its debt. The real question, they say, is not whether the U.S. can afford its obligations, but whether policymakers have the will to tap into that wealth.
The panic over the national debt hinges almost entirely on one metric: debt as a share of GDP. That figure is useful for comparing countries over time, but it's incomplete. GDP measures income in a single year, while debt accumulates over generations. Judging one against the other is like a bank approving a mortgage based on a single month's paycheck while ignoring the applicant's second home, cars, and retirement accounts. No careful lender works that way.
Instead, analysts propose dividing the debt by the nation's private wealth—the combined net worth of all Americans, including homes, businesses, stocks, and retirement savings. By that measure, the debt equals only about one-fifth of total wealth, far below the near-double ratio seen during World War II. Over the past 40 years, U.S. wealth has grown much faster than GDP, rising from about 2.5 times GDP to 4.5 times today, driven largely by gains in stocks and real estate that bypass middle-class earners.
Why does this measurement debate matter? Because how we frame a problem shapes the solutions we consider. When debt is seen as a crushing multiple of annual income, the only options appear to be cutting spending or raising taxes on wages. But comparing debt to wealth opens a different path—one that avoids austerity and doesn't squeeze the middle class.
Consider this: a one-time 10% tax on the wealth of the top 1% would raise enough to pay off about one-sixth of the entire federal debt. Today, the wealthy are taxed lightly on their assets. Capital gains are only taxed when realized, and inheritances can escape taxation entirely. That's why Elon Musk's net worth crossing $1 trillion in June didn't trigger a single dollar in additional tax. This has fueled debates over wealth taxes and whether billionaires contribute their fair share.
If the U.S. looks at what it owns rather than just what it earns, new options emerge: taxes on wealth and property, and reforms to inheritance and capital gains rules. Disagreements will persist over which tools to use, but that's a debate about priorities and political will, not about the nation's ability to pay. The ability is there.
Deficits still matter, and rising interest costs are already crowding out public investments. But the debt, while large, is far smaller than the nation's wealth. It's time to measure and act accordingly.
Austin Clemens and David Mitchell are fellows at the Washington Center for Equitable Growth.
