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The United States has crossed a significant financial milestone, with its total national debt surpassing $40 trillion for the first time, according to the Treasury Department. This alarming development has sparked renewed fears of a potential fiscal crisis, driven by soaring costs for social safety-net programmes and rising interest payments that are outpacing government revenues hampered by recent tax cuts.
Debt Milestone and its Implications
As of Tuesday, the total public debt stood at approximately $40.047 trillion, a figure that includes $32.266 trillion in Treasury securities held by the public and $7.782 trillion in intra-governmental debt. This staggering amount represents a more than twofold increase since President Donald Trump took office in January 2017 when the debt was recorded at $19.95 trillion. Notably, about one-third of this increase can be attributed to the government’s rapid borrowing during the COVID-19 pandemic, a trend that continued under both Trump and current President Joe Biden.
Maya MacGuineas, president of the non-partisan Committee for a Responsible Federal Budget, articulated the broader economic implications of this growing debt. “$40 trillion 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,” she stated. She emphasised that the increasing debt exacerbates inflation, limits other budget priorities, and leaves the nation susceptible to both domestic emergencies and international instability.
Rising Yields and Investor Sentiment
The mounting debt is already influencing investor behaviour. Recently, there has been a notable decline in demand for U.S. Treasuries, particularly from foreign investors, who hold close to one-third of these securities. Following a recent $25 billion auction of 30-year Treasury bonds that yielded the highest rates since 2021, long-term bond yields have surged to levels not seen in nearly 20 years. This trend has raised concerns about the cost of borrowing, as higher yields typically translate into increased interest rates for mortgages, car loans, and business financing.
In response to rising yields, U.S. Treasury Secretary Scott Bessent announced a significant increase in buyback operations for 10- to 30-year Treasuries, doubling the size to at least $4 billion per operation. This move aims to stabilise long-term bond yields and curb the upward pressure on interest rates.
Government Spending and the Deficit
The financial landscape remains turbulent, with the Treasury recently reporting the fourth-largest monthly deficit in U.S. history—$432 billion for July alone. This deficit has been exacerbated by tariff refunds, which have negatively impacted customs receipts for three consecutive months, alongside escalating expenditures for Social Security and Medicare benefits.
Despite these alarming figures, Trump has downplayed concerns about bond market volatility. Addressing reporters at the White House, he stated, “I don’t think so at all. I think we have a very powerful country, and we’re powering through these ridiculous interest rates.” His administration has largely supported high spending, leading to a $7.8 trillion increase in public debt during his first term, with significant contributions during the pandemic’s final months.
Since Trump’s return to office in January 2025, the national debt has grown by an additional $3.8 trillion, highlighting a total increase of $11.6 trillion across his two terms thus far. Biden’s presidency has also witnessed substantial debt growth, with increases fueled by COVID-19 recovery efforts and ambitious infrastructure investments.
The Future of U.S. Fiscal Policy
The Committee for a Responsible Federal Budget warns that the fiscal decisions made by both Trump and Biden have set the nation on an unsustainable debt trajectory. Trump’s proposed legislative package, known as the One Big Beautiful Bill Act, is projected to add another $4.7 trillion to the national debt, according to the Congressional Budget Office.
While Trump has portrayed his second term as focused on reducing costs, many of the cuts have targeted discretionary spending, which constitutes a modest portion of the overall federal budget. The U.S. government allocates approximately $7 trillion annually, with 60% earmarked for mandatory programmes, including Social Security, Medicare, Medicaid, and veterans’ care—all of which are designed to adjust with inflation.
Moreover, debt service costs, which now surpass Pentagon funding, have become a significant burden on the federal budget. Interest payments have grown so substantial that they have recently eclipsed Medicare outlays, becoming the second-largest expenditure after Social Security.
Why it Matters
As the national debt continues to soar, the implications for the U.S. economy are profound. The increasing reliance on borrowing to fund essential services and benefits raises critical questions about fiscal sustainability. With inflationary pressures mounting and interest rates poised to rise, the government faces an urgent need to address its fiscal policies. Inaction could lead to a deeper economic crisis, affecting not just the nation’s finances but the lives of millions of Americans reliant on government support. The path forward requires tough decisions on spending and taxation to ensure a balanced and stable economic future.
