US gross national debt has crossed the $40 trillion mark for the first time, according to government figures, surpassing earlier projections as borrowing accelerates, partly because of President Donald Trump’s invalidated tariffs.
The rise comes as the country’s long-term commitments to Social Security and healthcare continue to expand, while higher interest rates add to the cost of servicing the debt.
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Total public debt outstanding reached $40.05 trillion at the close of business on Tuesday, data released yesterday by the US Treasury Department showed.
The figure exceeds a Congressional Budget Office forecast that total borrowing would reach $39.4 trillion by the end of fiscal year 2026.
The increase is forcing the US to refinance debt at the highest rates seen since before the 2008 financial crisis
Yields on long-term Treasury bonds climbed to their highest level since 2007, as markets responded to mounting price pressures linked to the war on Iran and renewed concern over US deficit spending.
The move means the federal government must refinance its debt at borrowing costs not seen since before the 2008 global financial crisis.
However, the US Treasury Department acted to calm the long-term bond market early yesterday, helping push yields lower.
The federal government runs a deficit and borrows to meet its obligations, including spending on the war and the cost of tax cuts.
“It’s been well known for a while that the United States government was on a pretty unsustainable path with deficits,” said Jessica Riedl, a budget and tax fellow at the Brookings Institution.
“Over the last few years, the United States has moved into roughly $2 trillion deficits, even during peace and prosperity,” she added.
Deficits equivalent to 3-4% of GDP once raised concerns in financial markets, Ms Riedl said. Today, she noted, the figure is closer to 6-7%.
“That has made markets more nervous,” she said.
Higher interest rates, driven by inflation, have increased the government’s debt-service costs, while an ageing population is adding further pressure to federal finances.
Risks ahead
Economists caution that no single debt-to-GDP ratio automatically signals an impending crisis.
Michael Peterson, chairman and CEO of the Peter G.Peterson Foundation, said the debt burden reflects several forces, including an ageing population, rising healthcare costs and tax policies that fail to raise enough revenue to cover federal spending.
“Interest is our fastest-growing government program,” Peterson said, adding that the government spends more than $3 billion a day on interest and is expected to spend $16 trillion over the next decade.
Debt milestone marks the ‘culmination of years of fiscal irresponsibility’ – Michael Peterson
While the gross-debt figure is largely symbolic, many economists view debt held by the public as the more important gauge of its economic impact.
“But psychologically, these are the landmarks that warn financial markets that they need to take another look at rising debt,” Ms Riedl said.
Federal borrowing jumped during the Great Recession of 2007-2009 and rose again after the government’s response to the economic shock caused by Covid-19, said Caleb Quakenbush, director of fiscal policy at the Bipartisan Policy Center.
But he told AFP that Congress and successive US administrations have failed to confront the direction of federal spending in a “meaningful or durable way.”
He warned that the country faces uncertainty because of the “unprecedented levels of borrowing that we’re seeing now.”
In a crisis, bond markets could come under severe strain, he said.
Even without such a scenario, higher borrowing costs could spread to consumers and businesses, placing additional pressure on the wider economy.
Treasury Secretary Scott Bessent had previously set a target of reducing the US deficit to 3% of GDP.
