The national debt has been making the news, placing much of the focus on federal debt. Yet to gain a full appreciation of the nation’s debt, one must step back and take a wider view of the situation.

Take for example personal debt. Many are now addressing credit card bills for their holiday gift giving and spending. For most, these bills get paid on time, given that the average FICO score amongst consumers is around 715, considered good by the consumer credit reporting companies (Equifax, Transunion, and Experian).

According to a Bankrate survey, around one-half of consumers carry a credit card balance from month-to-month. The same survey noted that around three out of every eight people are willing to assume debt for discretionary purchases, items and services that people want but may not need. The total credit card debt in the third quarter of 2024 was over $1 trillion. This is the largest level ever reported, and over 50 percent more than what it was during the height of the COVID pandemic.

Yet all such debt is dwarfed by how our governments (federal, state and local) are accumulating debt.

It is broadly reported that the national debt is over $36 trillion. This translates into around $110 thousand for every person in the United States, well over the nation’s per capita income, suggesting an unsustainable pathway for managing the nation’s fiscal responsibility.

Needless to say, the federal government controls the printing presses for money, though the Federal Reserve manages how much money is actually printed and injected into the economy. Therefore, simply printing more money, albeit feasible, is not realistic, given the impact it would have on inflation if economic output cannot keep pace with the higher money supply.

What is less widely reported is the accumulated debt of the states and their local governments. This totaled over $3 trillion in 2022. Of course, the population of each state widely varies, so comparing California’s $558 billion to Idaho’s $4 billion would be misleading. Yet when looking at the accumulated debt per person in each state, smaller states like Wyoming and Hawaii look far more debt-burdened than their absolute debt levels suggest.

Then there are state pension liabilities, the amount of money needed today to pay all future pension demands. Such deficits and surpluses vary wildly. Eight states carry a pension surplus (as of 2022), while 23 carry a deficit of less than one thousand dollars per capita, a manageable level. The most debt-burdened states for pension liabilities are Illinois, Connecticut and New Jersey, further adding to their financial woes.

All this data suggests that debt has become an acceptable way of living, not only for individuals, but for government at all levels. Our consumer-centric economy relies on people spending more than they can afford, buying things and services that they want, willing to pay the long-term price for immediate ownership.

When people stray too far in their spending, bankruptcy may become the only viable path forward. Over 434 thousand personal (non-business) bankruptcies were filed in 2023. This is a historically low level compared to 2005, when over two million bankruptcy filings were made. How the numbers will move depends on how individuals manage their personal finances and how the economy grows or shrinks in the coming years.

Though the national debt level gets the most attention, debt is ubiquitous across all sectors of the economy, affecting every person’s life, lifestyle, and livelihood. At some point, debt must be repaid.

This could happen at any time with the federal debt. Foreign countries own over $8.5 trillion of our federal national debt. The three largest stakeholders are Japan (over $1.1 trillion), China (around $760 billion) and the United Kingdom (around $760 billion). With the exception of China, all the other major stakeholders enjoy friendly relations with the United States, though the complex economic ties between China and the United States position them as both economic allies and societal adversaries.

However, China has been reducing its ownership of United States debt. In 2013, they owned nearly $1.3 billion of such financial instruments. Over the past 11 years, it has been slowly reducing its exposure, with its current level now 35% below its peak.

Given that the national debt has continued to climb during this period, other countries, corporations, or people have stepped up to purchase this debt. What remains an open question is how long can such a quasi- Ponzi scheme continue.

The same can be said about state and local governments. Each has the ability to tax residents to generate revenue. One opportunity that several have taken advantage of is tax revenue from sports gambling, with nearly $2.5 billion collected across all states in 2023.

Debt is more than not paying bills in real-time. It is a way of living and thinking. Some debt is justifiable, like a mortgage to own a home or an auto loan for reliable transportation. Others, like for discretionary spending, are questionable.

At some point, all debt must be paid. Whether this is at the federal, state, local, or personal levels, the consequences of debt occur. How all such entities respond will determine everyone’s well-being well into the future.

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Sheldon H. Jacobson, Ph.D., is a professor of computer science in the Grainger College of Engineering at the University of Illinois Urbana-Champaign. He uses his expertise in risk-based analytics to address problems in public policy.

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