U.S. National Debt Surpasses $40 Trillion, Doubling in Under a Decade Amid Bipartisan Spending
The U.S. national debt has officially crossed the $40 trillion threshold for the first time, more than doubling in less than a decade. The milestone has triggered fresh warnings from fiscal watchdogs of a brewing crisis, as ballooning costs for social safety-net programs and surging interest payments increasingly outpace revenues constrained by tax cuts.
According to the Treasury Department’s latest daily cash and debt statement, total public debt outstanding reached $40.047 trillion on Tuesday. This figure comprises $32.266 trillion in Treasury securities held by the public and $7.782 trillion in intra-governmental debt holdings.
The federal government’s tab has more than doubled since January 2017, when President Donald Trump was first sworn in with the debt at $19.95 trillion. Roughly one-third of this surge occurred during two years of frantic borrowing to fund COVID-19 pandemic responses under both the Trump and Biden administrations. The remainder stems from the combined fiscal policy choices of both presidents, compounded by long-standing structural imbalances between tax revenues and government spending.
A Bipartisan Trajectory
Budget watchdog groups have anticipated this threshold for weeks, issuing stark warnings that a full-blown debt crisis could erupt unless lawmakers confront the unsustainable fiscal outlook through tax increases, spending cuts, or both.
“Forty trillion dollars of debt doesn’t exist solely on the government’s ledgers; it is felt throughout the economy and finds its way to the pocketbooks of people one way or another,” said Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget (CRFB).
“The more we borrow, the more we exacerbate inflation, squeeze out other priorities in the budget, and leave ourselves vulnerable to emergencies at home and turmoil abroad,” MacGuineas added, noting that the debt has quadrupled in under 20 years, after taking until 1981 to reach its first $1 trillion.
The debt load has grown significantly under both recent administrations:
* **Donald Trump:** Public debt rose by $11.6 trillion across his two terms. This includes a $7.8 trillion increase during his first term (with over half accumulating during the pandemic response) and a $3.8 trillion increase since the start of his second term in January 2025.
* **Joe Biden:** Public debt increased by $8.4 trillion during his four-year term, driven by heavy pandemic recovery spending, as well as major outlays for infrastructure investment, clean energy subsidies, and other Democratic priorities.
The CRFB estimates that the policy choices of both administrations have pushed the federal debt trajectory well beyond what would have accumulated under existing spending statutes at the time each took office. For example, the Congressional Budget Office (CBO) projects that Trump’s landmark second-term legislative package, the "One Big Beautiful Bill Act," will add another $4.7 trillion to the debt.
Market Jitters and Policy Responses
Global creditors are showing signs of wariness, with foreign demand for U.S. Treasuries—which make up nearly a third of the market—declining over the past year.
Following a recent $25 billion auction of 30-year Treasury bonds that cleared at the highest yield since 2021, long-bond yields hit their highest levels in nearly two decades on Tuesday. Investors are demanding greater compensation in the face of hefty U.S. government bond issuance.
In response, U.S. Treasury Secretary Scott Bessent took a bold step on Wednesday to push long-bond yields down, announcing a doubling of buyback sizes for 10- to 30-year Treasuries to at least $4 billion per operation. Higher Treasury yields at the longer end typically drive up interest rates for mortgages, auto loans, and commercial borrowing.
Despite the mountain of debt and market volatility, President Trump remains unconcerned. Asked at the White House whether Americans should worry, he dismissed the notion: “I don’t think so at all. I think we have a very powerful country, and we’re powering through these ridiculous interest rates — they’re ridiculous. Look, when our country is strong, interest rates should go down.”
The Structural Squeeze
The underlying fiscal math continues to deteriorate. The Treasury recently reported a $432 billion deficit for July—the fourth-highest monthly deficit in U.S. history. This was driven by tariff refunds that turned customs receipts negative for the third consecutive month, alongside growing outlays for Social Security and Medicare. Consequently, the deficit for the first 10 months of fiscal 2026 has already exceeded the total deficit for all of fiscal 2025, with two months remaining in the current fiscal year.
While President Trump has branded his second presidency as focused on cost-cutting—highlighting early federal agency job reductions orchestrated by the non-governmental Department of Government Efficiency—these reductions have largely targeted "discretionary" programs, which make up the smallest portion of the federal budget.
Of the roughly $7 trillion the U.S. spends annually, 60% is earmarked for "mandatory" programs, including Social Security, Medicare, Medicaid, and veterans' care. These costs generally grow automatically to keep pace with inflation and demographics.
Meanwhile, the cost of servicing the debt is skyrocketing. Another $1.1 trillion now goes solely toward paying interest on U.S. borrowing. The 2025 fiscal year marked the first time debt service costs exceeded Pentagon funding. In the first 10 months of fiscal 2026, interest costs eclipsed Medicare healthcare outlays, becoming the second-largest line item in the federal budget behind only the Social Security pension system.
As the "baby boom" generation continues to retire, the U.S. faces mounting pressure to fund retirement and healthcare costs, straining the trust funds behind Social Security and Medicare even as payroll and income tax revenues fall short of covering federal obligations.
FOMC MINUTES | 19 AUGUST 2026
The Fed minutes reveal a more hawkish tone than the rate decision suggested.
🔹 Inflation remains the Fed’s biggest concern.
🔹 3 policymakers backed a 25bp hike, while several others indicated further tightening could be necessary if inflation remains elevated.
🔹 Rates remain at 3.50%–3.75%.
🔹 Middle East tensions and energy prices remain key inflation risks.
🔹 Warsh is considering fewer annual Fed meetings to allow more time for data between decisions.
Market view:
Higher-for-longer expectations remain a risk for Gold and equities, while supporting USD and Treasury yields.
The key now is simple: inflation data will determine the Fed’s next move.