US gross national debt passes 40 trillion dollars for the first time

On Tuesday, the gross public debt of the United States soared past 40 trillion dollars, marking a historic milestone, according to data from the Treasury Department. This surpasses expectations set by the Congressional Budget Office, which had forecasted the debt to reach 39.4 trillion dollars by the end of fiscal 2026, and 40 trillion dollars in 2027.

The debt is split into two categories: 32.266 trillion dollars held by the public, including private investors, funds, and foreign entities, and 7.782 trillion dollars of intragovernmental debt owed to federal trust funds, notably social security. As a result, the debt-to-GDP ratio stands at 124%, the highest since World War II.

The surge in debt coincides with rising borrowing costs, with the yield on 30-year Treasury bonds reaching 5.3%, the highest level since 2007, leading to steeper refinance rates since the 2008 financial crisis. Analysts attribute this increase to concerns about inflation and the deficit, military spending related to the Iran conflict, and borrowing by tech firms for AI initiatives.

The fiscal year's projected deficit sits at 2.1 trillion dollars, nearly 6% of GDP, while July's monthly shortfall hit 432.3 billion dollars, the largest since 2016. Servicing this debt will cost 1.4 trillion dollars this year, expected to surpass social security spending within two years. May MacGuineas, president of the Committee for a Responsible Federal Budget, highlighted the debt's rapid growth over the past decade, noting it doubled in a decade and quadrupled in less than two decades.

The debt's trajectory is attributed to pandemic spending under Joe Biden and accelerated military expenditures since Donald Trump's return. Treasury Secretary Scott Bessent acknowledged inheriting "a mess" and pledged to double debt buybacks in secondary markets to reduce financing costs. However, the Congressional Budget Office warned that the current fiscal path is "unsustainable" and projects the public debt will grow from 101% of GDP this year to 120% by 2036, surpassing the 106% peak in 1946.