Total US debt has topped $40 trillion (€34.25 trillion) for the first time, the US Treasury Department said on Wednesday, drawing fresh warnings that a fiscal crisis is brewing as ballooning costs for social safety-net programmes and interest payments far outstrip revenues held back by tax cuts.
The Treasury’s latest daily cash and debt balances statement showed total public debt outstanding at $40.047 trillion on Tuesday, a total that includes Treasury securities held by the public of $32.266 trillion and intra-governmental debt holdings of $7.782 trillion.
The federal government’s IOU has now more than doubled in less than a decade, from $19.95 trillion when president Donald Trump was sworn in for the first time in January 2017. Roughly one-third of that increase occurred during two years of frantic government borrowing to fund the Covid-19 pandemic responses undertaken by Trump and former president Joe Biden, with the fiscal policy choices of both presidents combining with long-running tax-and-spending imbalances to account for the rest.
Budget watchdog groups have been anticipating the crossing of the threshold for weeks. Some issued stark warnings that a full-blown debt crisis could erupt unless politicians confront an unsustainable fiscal outlook and raise taxes, cut spending, or both. “This bleak milestone serves as yet another reminder that it’s past time to confront a fundamental mismatch,” Margaret Spellings, chief executive of the Bipartisan Policy Center, a centrist think tank, said last week as the $40 trillion threshold neared.
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“Our federal programmes spend much more than the government takes in, and the biggest-ticket items in the federal budget are all running on autopilot,” Spellings said. “Federal debt is already raising the cost of living and choking out other spending and investment, threatening our economy and Americans’ long-term prosperity.”
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Global US creditors may already be growing wary. Days after a $25 billion auction of 30-year Treasury bonds went off at the highest yield since 2021, yields on so-called long bonds on Tuesday hit their highest levels in nearly two decades as investors demanded greater compensation in the face of hefty US government bond issuance.
On Wednesday, US treasury secretary Scott Bessent took a bold step to push long bond yields back, announcing a doubling of buyback sizes for 10- to 30-year Treasury bonds to at least $4 billion per operation.
Demand for US debt by foreign investors – who hold nearly one-third of all Treasuries – has been declining over the past year, leaving more bonds to fall to more price-sensitive buyers, which can exacerbate market volatility, John Canavan, lead financial market analyst in Oxford Economics’ Macroeconomic and Investor Services group, wrote on Tuesday.
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The Treasury last week reported the fourth-highest monthly deficit in US history – $432 billion for July – as tariff refunds turned customs receipts negative for the third month in a row and outlays for Social Security and Medicare benefits for seniors continued to grow.
The deficit for the first 10 months of fiscal 2026 has already exceeded the total gap for all of fiscal 2025, with two months to go in the current fiscal year. Trump has largely ignored the dwindling number of fiscal hawks in his Republican Party, championing prolific spending across his two terms. Public debt rose by $7.8 trillion during Trump’s first term, more than half of that accumulated during the pandemic response over his last nine months in office.
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Since Trump took office a second time in January 2025, the US debt load has increased by $3.8 trillion, for total growth of $11.6 trillion across his two terms so far. Public debt increased by $8.4 trillion during Biden’s term, also marked by heavy Covid-19 recovery spending, but also driven by big-ticket outlays for infrastructure investment, clean energy subsidies and other priorities championed by his Democratic Party.
The non-partisan Committee for a Responsible Federal Budget estimates the policy choices of Trump and Biden have increased the federal debt trajectory beyond what would have accumulated under the existing spending statutes when each took office.
For instance, Trump’s landmark second-term legislative package – the One Big Beautiful Bill Act – will add another $4.7 trillion in debt, according to the Congressional Budget Office, the nonpartisan bookkeeper for federal politicians.
Trump has branded his second presidency as one focused on cost-cutting, marked by early federal agency job cuts ordered by the non-governmental Department of Government Efficiency. But much of his spending reductions have targeted so-called “discretionary” programmes, the smallest portion of the federal budget. The US spends roughly $7 trillion annually, and 60 per cent of it is earmarked for so-called “mandatory” programmes, including payments for Social Security, Medicare, Medicaid and veterans’ care, that generally grow to keep pace with living costs.
Another $1.1 trillion pays the interest on US borrowing, the cost of which continues to rise as the debt pile grows and as interest rates climb. The 2025 fiscal-year budget marked the first time that debt-servicing costs exceeded Pentagon funding. In the first 10 months of the 2026 fiscal year, interest costs have eclipsed Medicare healthcare outlays to become the second-largest line-item in the federal budget, behind the Social Security pension system.
The US is spending more to fund the retirement and healthcare costs of the “baby boom” generation, straining the trust funds behind Social Security and Medicare even as payroll and income tax revenues fall short of covering federal costs. – Reuters
