The US national debt has crossed USD 40 trillion for the first time, underlining the scale of America’s fiscal challenge as investors demand higher returns to hold government bonds.
Treasury data showed that total public debt outstanding reached about USD 40.05 trillion on Tuesday (August 18), comprising roughly USD 32.3 trillion held by the public and USD 7.8 trillion in intragovernmental holdings. The milestone comes only months after the debt crossed USD 39 trillion in March.
The speed of the increase is striking. The debt was below USD 20 trillion in 2016 and has therefore more than doubled in roughly a decade. Pandemic spending was a major contributor, but persistent budget deficits, tax-and-spending imbalances, higher defense expenditure, and rising costs for Social Security and Medicare have continued to push borrowing higher.
The problem is becoming more acute because the world’s largest economy is not merely borrowing more; it is paying more to service what it already owes.
Net interest on publicly held federal debt reached USD 963 billion between October 2025 and July 2026, according to the Congressional Budget Office, equivalent to more than USD 3 billion a day.
Interest costs have become one of the largest items in the federal budget and are putting pressure on spending priorities.
The bond market is signaling that investors are increasingly conscious of the problem.
On August 13, the Treasury sold USD 25 billion of 30-year bonds at a yield of 5.22%, the highest borrowing cost for such debt since 2001. Longer-dated Treasury yields have remained elevated as investors assess inflation, government borrowing requirements, and geopolitical risks.
The rise in yields matters far beyond Washington. Treasury bonds underpin global financial markets and influence borrowing costs for mortgages, corporate debt, and other assets. If investors demand a higher return from the US government, companies and households can ultimately face higher financing costs as well.
The changing structure of government spending is also complicating the fiscal outlook. The United States is simultaneously dealing with high defense expenditure, substantial social-programme commitments, and increased interest costs, while the government continues to run large deficits.
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Treasury Secretary Scott Bessent has sought to ease pressure in the bond market by expanding Treasury buybacks. The Treasury announced that it would double the size of its buyback operations to USD 4 billion per operation, a move intended partly to improve market liquidity and help stabilise trading in longer-dated debt.
Higher Treasury yields at the longer end tend to push up interest rates for mortgages, cars, and commercial loans. With the mountain of debt showing no signs of slowing down, Trump again repeated his frequent demand for lower rates.
Asked about whether Americans should worry about bond market volatility, Trump said, “I don’t think so at all. I think we have a compelling country, and we’re powering through these ridiculous interest rates—they’re ridiculous. Look, when our country is strong, interest rates should go down.”
Talking about the Treasury, the department, in the last week reported the fourth-highest monthly deficit in the United States’ history, USD 432 billion for July, as tariff refunds turned customs receipts negative for the third month in a row and outlays for Social Security and Medicare benefits for seniors continued to grow.
The deficit for the first 10 months of fiscal 2026 has already exceeded the total gap for all of fiscal 2025, with two months to go in the current fiscal year.
Trump, a key champion of heavy spending across his two terms, saw public debt rising by USD 7.8 trillion during his first term, with more than half of it accumulating during the pandemic response over his last nine months in office.
Since Trump took office a second time in January 2025, the debt load has increased by USD 3.8 trillion, for a total growth of USD 11.6 trillion across his two terms so far.
Public debt, during Democrat Joe Biden’s tenure, increased by USD 8.4 trillion, marked by heavy COVID-19 recovery spending and big-ticket outlays for infrastructure investment, clean energy subsidies, and other priorities championed by his party.
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As per the Committee for a Responsible Federal Budget estimates, the policy choices of Trump and Biden have increased the federal debt trajectory beyond what would have accumulated under the existing spending statutes when they each took office.
Trump’s “One Big Beautiful Bill Act” will add another USD 4.7 trillion in debt, according to the nonpartisan bookkeeper for federal lawmakers.
The Republican has branded his second presidency as one focused on cost-cutting, marked by early federal agency job cuts ordered by the non-governmental Department of Government Efficiency (DOGE).
However, much of his spending reductions have targeted so-called “discretionary” programs, the smallest portion of the federal budget. While the United States spends roughly USD 7 trillion annually, and 60% of it is earmarked for so-called “mandatory” programs, including payments for Social Security, Medicare, Medicaid, and veterans’ care, the ratios generally grow to keep pace with living costs.
Another USD 1.1 trillion pays the interest on US borrowing, the cost of which rises as the debt pile grows and as interest rates climb.
The 2025 budget marked the first time debt service costs exceeded Pentagon funding.
“In the first 10 months of the 2026 fiscal year, interest costs have eclipsed Medicare healthcare outlays to become the second-largest line item in the federal budget, behind the Social Security pension system. The US is spending more to fund the retirement and healthcare costs of the ‘baby boom’ generation, straining the trust funds behind Social Security and Medicare even as payroll and income tax revenues fall short of covering federal costs,” the Committee for a Responsible Federal Budget noted.
For Treasury, buybacks alone cannot solve the underlying fiscal imbalance.
The USD 40 trillion milestone is therefore less important as a round number than as a warning about the trajectory of US borrowing.
For decades, Unlce Sam’s government debt has benefited from the dollar’s reserve-currency status and the depth of the Treasury market. That provides Washington an extraordinary capacity to borrow.
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But that privilege does not make debt costless.
If deficits remain large while interest rates stay elevated, an increasing share of federal revenue will go toward servicing old borrowing rather than financing new investments or public services.
The central question for investors is no longer whether the US can borrow. It is how much it will eventually have to pay to keep doing so.