US national debt exceeds $40tn for first time

The US gross national debt has surged past $40 trillion for the first time, government data showed Wednesday, outstripping earlier forecasts at a pace fuelled in part by President Donald Trump’s invalidated tariffs.

The uptick in borrowing is a blow to Trump, who promised to cut public spending during his 2024 presidential campaign, and sparked a backlash from US representatives across the political field.

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The new record comes as longer-term US obligations linked to social security and health care have been growing, while interest payments have climbed as well.

Total public debt outstanding stood at $40.05 trillion at the close of business Tuesday, according to data released Wednesday by the Treasury Department.

That surpasses an earlier forecast by the Congressional Budget Office that overall borrowing would hit $39.4 trillion by the end of fiscal year 2026.

Rising US debt comes as concerns over inflation and government spending have been driving investor worries, and the cost of borrowing has grown.

The war in the Middle East has also piled pressure on Trump, costing the lives of 18 American service members and $37.5 billion in military spending as the nearly six-month-old conflict grinds on with little sign of resolution.

Defense spending shows no sign of slowing, with the US House of Representatives narrowly passing an annual defense policy bill in July that would authorize a record $1.15 trillion in funding for the Pentagon.

Savings from Trump’s commission to slash the US federal workforce and agencies have also been hard to quantify, with independent observers insisting figures claimed by the US government -- the Department of Government Efficiency (DOGE) website currently posts cuts of $215 billion -- fall short of actual savings.

Trump’s mega-wealthy ally Elon Musk, who led the cost-cutting drive, said in 2025 he believed his stint was “a little bit successful”.

‘UNSUSTAINABLE PATH’

Republican Senator Rick Scott joined a wave of lawmakers in condemning the debt surge, urging Congress to “get spending under control and BALANCE THE BUDGET”.

“Americans deserve better,” he wrote on X.

Democratic Senator Mark Kelly, a retired US Navy combat pilot, accused Trump of enriching himself while running up the national debt.

“The President said he’d pay off the debt in his first term. Well we all knew that was a lie,” he posted.

“Instead he ran it up to $40 trillion while he and his family made billions.”

Democratic Congressman Ted Lieu accused Trump of having “ushered in the Golden Age of Debt.”

Yields on long-term Treasury bonds rose Tuesday to the highest level since 2007, reflecting growing price pressures due to war on Iran and anxiety over US deficit spending.

The increase forces the US government to refinance debt at the highest rates since before the 2008 global financial crisis.

But the US Treasury Department moved to steady the long-term bond market early Wednesday, sending yields lower.

The federal government operates at a deficit and borrows money to help cover its obligations, including its war spending and tax cuts.

“It’s been well-known for a while that the United States government was on a pretty unsustainable path with deficits,” said Jessica Riedl, a budget and tax fellow at the Brookings Institution.

“Over the last few years, the United States has moved into roughly $2 trillion deficits, even during peace and prosperity,” she added.

While deficits of three to four percent of GDP used to worry financial markets, she noted that levels are closer to six to seven percent of GDP now.

“That has made markets more nervous,” she said.

As inflation pushed interest rates higher, interest costs on the debt have risen as well, and costs linked to an ageing population are pushing up deficits.

RISKS AHEAD

Analysts note that there is no debt-to-GDP level that automatically triggers a crisis.

Although the gross debt marks a symbolic threshold, many economists consider debt held by the public to be the most economically meaningful measure.

“But psychologically, these are the landmarks that warn financial markets that they need to take another look at rising debt,” Riedl said.

Federal borrowing surged during the Great Recession of 2007-2009 and increased following the government’s response to the downturn triggered by Covid-19, said Caleb Quakenbush, director of fiscal policy at the Bipartisan Policy Center.

But he told AFP that the trajectory of US budget spending has not been addressed by Congress or US administrations in a “meaningful or durable way.”

He warned of uncertainty surrounding the “unprecedented levels of borrowing that we’re seeing now.”

Bond markets could face steep challenges in a crisis scenario, he noted.

But even outside that situation, the United States could see higher borrowing costs for consumers and businesses, squeezing the economy.

Treasury Secretary Scott Bessent had previously set a goal of cutting the US deficit to three percent of GDP.