The United States’ total public debt crossed $40 trillion for the first time on Wednesday, a fiscal milestone reached four months earlier than government forecasters had projected just six months ago, as war spending, tax cuts and a Supreme Court ruling striking down billions in tariff revenue combined to accelerate the nation’s borrowing. The Treasury Department’s daily cash and debt statement showed total public debt outstanding at $40.047 trillion as of Tuesday, made up of $32.266 trillion in Treasury securities held by the public and $7.782 trillion in intragovernmental debt holdings.
The figure marks more than a doubling of the federal debt in under a decade, up from $19.95 trillion when President Donald Trump was sworn in for his first term in January 2017. Roughly a third of that increase stemmed from emergency borrowing during the COVID-19 pandemic under both Trump and former President Joe Biden, while the remainder reflects a long-running mismatch between federal spending and revenue that both parties have struggled to close.
“Forty trillion dollars of debt doesn’t exist solely on the government’s ledgers; it is felt throughout the economy and finds its way to the pocketbooks of people one way or another,” said Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget, in a statement issued shortly after the Treasury data was released. “The more we borrow, the more we exacerbate inflation, squeeze out other priorities in the budget, and leave ourselves vulnerable to emergencies at home and turmoil abroad.”
MacGuineas noted the debt reached $40 trillion less than five months after crossing the $39 trillion mark, and has now quadrupled in under 20 years after taking nearly two centuries — until 1981 — to reach $1 trillion for the first time. “It is staggering how predictable the fiscal decline of a global power can become,” she said.
War Spending, Tax Cuts and Lost Tariff Revenue Converge
The pace of borrowing has outstripped even recent government projections. Six months ago, the nonpartisan Congressional Budget Office estimated total debt would top out near $39.4 trillion for the fiscal year. Analysts now attribute the faster-than-expected climb in large part to the Supreme Court’s ruling that many of Trump’s tariffs were unlawful, a decision that forced the federal government to refund more than $160 billion to companies that had already paid the import duties, turning customs receipts negative for three consecutive months.
Treasury Secretary Scott Bessent, who had set a goal of cutting the deficit to 3% of gross domestic product by 2028 from more than 6% when Trump took office, acknowledged last week that deficits were moving in the wrong direction this year. In an interview with Newsmax, Bessent pointed to military spending tied to the war with Iran as a central driver, along with the tariff refunds and rising energy prices linked to the conflict, which he said has weighed on economic growth and reduced the tax-revenue gains the administration had hoped for.
Bessent also cited last year’s tax legislation, which allows businesses to immediately deduct the cost of factory construction and equipment, as a near-term drag on revenue that the Joint Committee on Taxation estimates could cost $100 billion this year alone. He defended the provision as a long-term investment. “That is a hit now to the deficit, but we are creating productive assets for future growth which will be paying taxes down the line,” Bessent said. “I think of that more as like pulling back a slingshot and creating a lot of potential energy that becomes kinetic.”
Bessent Moves to Steady Bond Markets as Yields Spike
Global demand for U.S. Treasuries has shown signs of softening, with foreign investors — who hold nearly a third of outstanding Treasuries — pulling back over the past year. Days after a $25 billion auction of 30-year Treasury bonds priced at the highest yield since 2021, long-bond yields climbed Tuesday to their highest level in nearly two decades, as investors demanded greater compensation for the growing supply of government debt.
In response, Bessent announced Wednesday that the Treasury would double the size of its buyback operations for 10- to 30-year Treasuries to at least $4 billion per operation, an effort to push long-term borrowing costs back down. Higher long-bond yields tend to ripple into mortgage rates, auto loans and commercial lending. Bessent had already made a rare intervention in currency markets earlier this year to prop up the Japanese yen, a move aimed partly at discouraging Japan — the largest foreign holder of U.S. Treasuries, with roughly $1.14 trillion — from selling its holdings to defend its own currency.
Asked at the White House whether Americans should be concerned about bond market volatility, Trump dismissed the idea. “I don’t think so at all. I think we have a very powerful country, and we’re powering through these ridiculous interest rates — they’re ridiculous,” Trump said. “Look, when our country is strong, interest rates should go down.”
Interest Payments Now Outpace the Pentagon
The Treasury reported last week that the federal government ran a $432.3 billion deficit in July, the highest monthly shortfall since March 2021 and the fourth-highest in U.S. history. The deficit for the first ten months of fiscal 2026 has already exceeded the entirety of fiscal 2025’s gap, with two months still remaining in the fiscal year. According to the Congressional Budget Office, net interest payments on the debt totaled $963 billion between October 2025 and July 2026 — roughly $3.18 billion a day — an increase of 14% over the same period last year.
Debt service costs first exceeded Pentagon funding in fiscal year 2025, and in the first ten months of fiscal 2026, interest payments have surpassed Medicare outlays to become the second-largest line item in the federal budget, trailing only Social Security. Roughly 60% of the government’s approximately $7 trillion in annual spending goes toward mandatory programs — Social Security, Medicare, Medicaid and veterans’ care — that generally rise automatically with living costs, leaving discretionary programs, including much of Trump’s cost-cutting push through the Department of Government Efficiency, a comparatively small share of the budget to work with.
“The scariest thing about this is how we’re starting to see the debt spiral begin,” said Marc Goldwein, senior policy director for the Committee for a Responsible Federal Budget, referring to the growing share of new borrowing that goes simply toward paying interest on old borrowing.
A Bipartisan Debt Load, Doubled Under Both Parties
Public debt rose by $7.8 trillion during Trump’s first term, more than half of it accumulated in his final nine months in office amid the pandemic response. Since returning to office in January 2025, the debt has grown by another $3.8 trillion, bringing his combined two-term total to $11.6 trillion in new borrowing. Public debt rose by $8.4 trillion under Biden, driven by pandemic recovery spending as well as infrastructure investment and clean-energy subsidies championed by his administration.
The Committee for a Responsible Federal Budget has found that policy decisions made under both presidents pushed the debt trajectory well beyond what existing law would have produced. Trump’s second-term legislative package, the One Big Beautiful Bill Act, is projected by the Congressional Budget Office to add $4.7 trillion to the debt on a dynamic basis through 2035, on top of the $5 trillion increase to the statutory debt limit — raising it to $41.1 trillion — that the same law enacted in July 2025.
Trump has cast his second term as one focused on fiscal discipline, but the Department of Government Efficiency, which initially promised $1 trillion in savings under Elon Musk, has so far claimed just over $200 billion — a figure the Government Accountability Office said this month lacks reliability and transparency.
Debt Ceiling Deadline Now Arriving Ahead of Schedule
The accelerated pace of borrowing means the $41.1 trillion statutory debt limit — raised by Congress just over a year ago — is now on track to be reached sooner than budget analysts had anticipated. The Bipartisan Policy Center had projected the government would not hit the ceiling again until sometime between late winter and mid-summer of 2027, but faster-than-expected borrowing this year has some analysts now warning the threshold could be reached by early next year, which would force Congress to again raise or suspend the limit to avoid a first-ever default.
“Our federal programs spend much more than the government takes in, and the biggest-ticket items in the federal budget are all running on autopilot,” said Margaret Spellings, president of the Bipartisan Policy Center. “Even in the rosiest scenarios, we’re speeding toward a cliff and refusing to turn the wheel.”
Looking further ahead, the Congressional Budget Office projects that without significant policy changes, federal debt held by the public will climb from around 101% of GDP this year to 120% by 2036 — surpassing the post-World War II record of 106% — and to 175% of GDP by 2056. The agency projects the annual deficit will widen from roughly $1.9 trillion this year to $3.1 trillion by 2036, with total deficits over the coming decade reaching an estimated $24 trillion.
Some uncertainty is also building around the Federal Reserve’s own $6.8 trillion portfolio of government bonds and mortgage-backed securities. Fed Chairman Kevin Warsh, who took over in May, has made reducing those holdings a priority, though he has not yet detailed a specific plan and is expected to wait for a task force reviewing the central bank’s balance sheet to finish its work by year’s end. Traders say a modest rebalancing of the Fed’s holdings would likely have limited market impact, but a more aggressive sell-off of long-term bonds could add further strain to a Treasury market already absorbing record levels of new issuance.