US National Debt Exceeds $40trn For First Time

The US gross national debt has surpassed $40 trillion for the first time, according to government data, exceeding earlier forecasts as borrowing continues to rise amid higher spending and growing interest costs.

The total public debt outstanding reached $40.05 trillion at the close of business Tuesday, according to data from the US Treasury Department.

The figure is higher than the Congressional Budget Office’s earlier projection that US borrowing would reach $39.4 trillion by the end of the 2026 fiscal year.

The increase comes as President Donald Trump faces growing criticism over government spending, despite campaigning in 2024 on a pledge to reduce public expenditure.

Long-term obligations linked to Social Security and healthcare have continued to grow, while higher interest rates have also increased the cost of servicing the debt.

The nearly six-month-old war in the Middle East has added further pressure on US finances, with the conflict reportedly costing $37.5 billion in military spending and the lives of 18 American service members.

Defence spending is also expected to remain high. The US House of Representatives narrowly passed an annual defence policy bill in July that would authorise a record $1.15 trillion for the Pentagon.

Efforts to reduce government spending have also come under scrutiny. Trump’s Department of Government Efficiency (DOGE) currently claims about $215 billion in cuts, although independent observers have questioned whether the reported savings reflect actual reductions in government expenditure.

Lawmakers Raise Concerns

The rise in national debt has drawn criticism from lawmakers across the political divide.

Republican Senator Rick Scott called on Congress to reduce spending and balance the federal budget, while Democratic Senator Mark Kelly accused the Trump administration of allowing the debt to rise despite previous promises to address it.

Democratic Congressman Ted Lieu also criticised the administration, describing the development as a “Golden Age of Debt.”

Meanwhile, yields on long-term US Treasury bonds recently climbed to their highest level since 2007, reflecting concerns about inflation, government borrowing and the economic impact of the war.

Higher yields mean the government must pay more to refinance its debt, potentially increasing borrowing costs for consumers and businesses.

Growing Fiscal Pressure

The US government operates with a budget deficit and relies on borrowing to meet obligations, including spending on defence and tax cuts.

Jessica Riedl, a budget and tax fellow at the Brookings Institution, said the US had been on an unsustainable fiscal path for some time, with annual deficits approaching $2 trillion even during periods of economic stability.

She noted that deficits which previously stood at around three to four per cent of GDP are now closer to six to seven per cent, increasing concerns in financial markets.

Rising interest rates and an ageing population are also putting additional pressure on federal finances.

Risks Ahead

Economists say crossing the $40 trillion threshold does not automatically mean the US is facing a debt crisis. Many consider debt held by the public a more important measure of the government’s financial position than gross national debt.

However, the milestone highlights the growing scale of US borrowing and could increase scrutiny from investors and policymakers.

Higher borrowing costs could eventually affect households and businesses by making loans more expensive and placing additional pressure on economic growth.

Treasury Secretary Scott Bessent has previously set a target of reducing the US budget deficit to three per cent of GDP.