Federal debt held by the public has reached $32 trillion as of July 2026—about the size of the entire U.S. economy—and there are few signs that the fiscal outlook will improve in the near term. When the government borrows, it competes with private borrowers for the same pool of savings that funds new housing construction, business expansion, car loans, and student loans. Competition for those funds pushes interest rates up, as borrowers must offer higher returns to attract lenders away from virtually risk-free Treasury securities. Economists call this dynamic “crowding out.” This explainer examines the mechanisms behind crowding out and how increased government borrowing raises costs for Americans.[…]