US national debt exceeds US$40 trillion

The gross national debt of the United States has surpassed the US$40 trillion mark, according to government data released on Wednesday. This figure exceeds initial projections and is primarily driven by factors such as former President Donald Trump's invalidated tariffs and the growth of long-term obligations tied to social security and healthcare.

The total public debt outstanding reached US$40.05 trillion at the close of business on Tuesday, surpassing the Congressional Budget Office's earlier forecast of US$39.4 trillion by the end of fiscal year 2026.

The rise in borrowing costs is causing concern, as yields on long-term treasury bonds have risen to their highest level since 2007 due to geopolitical tensions in the Middle East and apprehension surrounding US deficit spending. This increase in interest rates forces the US government to refinance its debt at the highest rates since before the 2008 global financial crisis. In response, the US Treasury Department attempted to stabilize the long-term bond market early on Wednesday, but yields managed to decline slightly.

The federal government operates with a deficit, borrowing money to cover the shortfall. However, it has long been recognized that the United States has been on an unsustainable fiscal path, with annual deficits reaching roughly US$2 trillion during periods of peace and prosperity. While deficits of 3 to 4 percent of GDP were once a cause for concern among financial markets, the current levels of 6 to 7 percent of GDP have raised more apprehension, as noted by Jessica Riedl, a budget and tax fellow at the Brookings Institution.