US National Debt Surpasses Record $40 Trillion

The United States national debt has surpassed $40 trillion for the first time in history, according to Treasury Department data released Wednesday. The Treasury’s latest debt balance showed $40.047 trillion as of Tuesday afternoon, marking a staggering milestone that underscores the country’s mounting fiscal challenges.

The unprecedented figure comes just five months after the U.S. hit a record $39 trillion in March, and five months after reaching $38 trillion in October 2025. The debt has more than doubled in less than a decade, growing from $19.4 trillion ten years ago, according to CNBC.

Context: Decades in the Making

The milestone marks years of government spending that grew under both Donald Trump and Joe Biden. During his first term, Trump approved $8.4 trillion worth of debt, with a huge chunk going to COVID-19 relief spending, while Biden approved $4.3 trillion worth of debt, according to the Committee for a Responsible Federal Budget, as The Guardian reported.

For perspective, it took nearly 200 years for America’s gross debt to reach $1 trillion for the first time in 1981. The debt has doubled since January 2017, when Trump began his first term and the debt stood at $19.95 trillion, Al Jazeera reported.

The debt has grown by $3.8 trillion since Trump returned to office in January 2025, amounting to a total of $11.6 trillion across his two terms so far. The U.S.-Israeli war in Iran, which began in early 2026, has been a significant factor, with White House economic adviser Kevin Hassett estimating in March that the conflict had already cost the U.S. more than $12 billion.

The Fiscal Picture

Treasury reported a $432.3 billion deficit in July 2026 — the highest monthly level in more than five years — with the year-to-date shortfall nearing $1.8 trillion. Interest on the debt has totaled nearly $1.2 trillion this year and is the largest budget expenditure outside of Social Security and Medicare.

The U.S. spends about $7 trillion annually, with about 60 percent going to Social Security, health insurance including Medicare and Medicaid, and veterans’ care. The U.S. now pays about $1.1 trillion annually to service its debt — slightly more than it spends on defense.

Expert Reactions

Fiscal policy experts expressed alarm at the milestone. Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said in a statement: “$40 trillion 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. 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.”

Michael A. Peterson, CEO of the Peter G. Peterson Foundation, said: “If we want to improve our living standards, today and for the next generation, now is the time for lawmakers to put our nation on a more affordable and sustainable path.”

Margaret Spellings, president and CEO of the Bipartisan Policy Center, warned: “The federal debt is already raising the cost of living and choking out other spending and investment, threatening our economy and Americans’ long-term prosperity. Our current fiscal trajectory is plainly unsustainable, and that’s the best-case scenario. AI disruption, a recession, global war, or any number of other events could quickly push us over the edge from a challenge into a full-blown crisis.”

Administration Response

Kush Desai, a White House spokesman, defended the administration’s approach: “The Trump administration has been focused on slashing waste, fraud, and abuse in federal spending while accelerating economic growth to get America’s debt-to-GDP ratio trending in the right direction.”

However, experts say the exploding debt is already affecting Americans’ pocketbooks by raising borrowing costs for mortgages and cars, lowering wages from businesses with less money to invest, and creating more expensive goods and services. As Michael Peterson told CBS News: “If the Treasury rate is going up, that means your mortgage rate is going up, your car loan is going up, your credit card rates are going up.”

Who Owns the Debt

Public debt borrowed from domestic and foreign investors makes up 80 percent — roughly $32 trillion — of the gross debt, according to Treasury data. About $21 trillion is owed domestically to creditors including the Federal Reserve ($4.528 trillion), mutual funds ($5.195 trillion), pension funds ($1.135 trillion), state and local governments ($1.636 trillion), commercial banks ($2.083 trillion), and other corporate and individual lenders ($6.660 trillion).

Internationally, the U.S. owes Japan $1.203 trillion, the United Kingdom $889 billion, and China $683 billion, among more than 30 other entities. Foreign debt holders accounted for 32 percent of gross debt by 2025, up from just 5 percent in 1970.

What’s Next

The milestone was reached as Congress, currently out of session, remains at an impasse over its latest spending bill. The House and Senate passed two different bills that would fund the federal government, which is scheduled to shut down on September 30 if a bill isn’t adopted by both chambers and signed by the president.

Earlier this week, the Treasury announced it would double its buyback of government debt after the bond market balked at ongoing inflation and continued conflict between the U.S. and Iran. Treasury yields have surged since late June, hitting levels not seen since before the global financial crisis.

The Bipartisan Policy Center estimates the U.S. will most likely reach the $41.1 trillion debt limit sometime between late winter and mid-summer of 2027, requiring Congress to again vote on whether to raise or suspend it. The Peterson Foundation estimates the debt could reach $50 trillion in six years without spending or tax reforms.

The CBO predicted in May 2023 that the U.S. would reach $40 trillion in 2028 — the milestone arrived two years earlier than forecast. The CBO now projects debt will rise from 101 percent of GDP in 2026 to 120 percent in 2036, well above the previous U.S. record of 106 percent after World War II.

While most experts express alarm about the debt trajectory, some economists offer a more measured perspective. Dean Baker, co-founder of the Center for Economic and Policy Research, argues that a strong U.S. economy can continue to shoulder the burden, and that more immediate threats include tariffs, the Iran war’s impact on prices, and a potential AI bubble. “If people just become wary of U.S. markets and the U.S. economy, they might pull their money out,” Baker told CBS News. “So I think there is an issue with foreign money leaving the U.S. but the government debt isn’t the biggest factor, and probably not even a major factor.”

As the U.S. approaches a potential government shutdown and midterm elections, the $40 trillion milestone serves as a stark reminder of the fiscal challenges facing the world’s largest economy — and the difficult choices ahead for lawmakers on both sides of the aisle.