US national debt exceeds US$40 trillion

The US gross national debt has surpassed the US$40 trillion mark, according to data released by the US Treasury Department on Wednesday. This figure exceeds earlier predictions and is primarily driven by factors such as invalidated tariffs under US President Donald Trump's administration. The increase in borrowing is further amplified by the growth of long-term obligations related to social security and healthcare, as well as rising interest payments.

At the close of business on Tuesday, the total public debt outstanding was recorded at US$40.05 trillion. This amount surpasses the earlier forecast by the Congressional Budget Office, which had predicted borrowing would reach US$39.4 trillion by the end of fiscal year 2026. The rising US debt coincides with heightened concerns over inflation, the ongoing Middle East conflict, and government spending, leading to investor apprehension and causing interest rates to climb.

Yields on long-term Treasury bonds surged to their highest level since 2007 on Tuesday, signaling growing price pressures stemming from the Middle East conflict and apprehension about US deficit spending. This rise in interest rates compels the US government to refinance its debt at the highest rates since before the 2008 global financial crisis.

The US Treasury Department attempted to stabilize the long-term bond market early on Wednesday, resulting in a decrease in yields. The federal government operates with a deficit, borrowing funds to cover its obligations, including military spending and tax cuts. It has been widely recognized for some time that the United States is on an unsustainable path with its deficits, according to Jessica Riedl, a budget and tax fellow at the Brookings Institution.

Over the past few years, the US government has experienced deficits of approximately US$2 trillion even during times of peace and prosperity.

While deficits of three to four percent of GDP previously raised concerns among financial markets, the current levels have risen to six to seven percent of GDP, which has made markets more nervous. As inflation drives interest rates higher, interest costs on the debt have also increased. Additionally, the costs associated with an aging population are contributing to the growing deficits.