America’s national debt has more than doubled in less than a decade, driven by pandemic spending, persistent deficits, tax cuts and a rapidly rising interest burden
The United States has crossed a major fiscal threshold, with its national debt surpassing $40 trillion for the first time, underscoring the scale of Washington’s long-standing budget imbalance.
According to US Treasury data, total public debt stood at $40.047 trillion. Of this, $32.266 trillion is held by the public, while $7.782 trillion is held in intragovernmental accounts. The figure has more than doubled from $19.95 trillion when Donald Trump first took office in January 2017.
The development has reignited debate over the sustainability of US public finances. However, analysts caution that the rise reflects structural pressures rather than any single administration or event. Persistent deficits, successive tax cuts, pandemic-era emergency spending, rising entitlement costs and higher interest payments have all contributed to the steady accumulation of debt.
Pandemic spending accelerated debt growth
The sharpest increase came during the COVID-19 pandemic, when the US government deployed trillions of dollars in emergency relief to support households, businesses and the broader economy.
While these measures helped prevent a deeper economic downturn, borrowing levels did not return to pre-pandemic norms once the crisis eased. Instead, federal deficits remained elevated as spending continued across infrastructure, healthcare, defence, clean energy and industrial policy initiatives.
Public debt rose by about $7.8 trillion during Trump’s first term, much of it during the pandemic period. It increased by a further $8.4 trillion under President Joe Biden, as recovery spending overlapped with new policy programmes. Since Trump returned to office in January 2025, debt has grown by an additional $3.8 trillion, according to Reuters calculations based on Treasury data.
More from BusinessStructural gap between spending and revenue
At the core of the fiscal challenge is a persistent mismatch between government spending and revenue.
Mandatory programmes such as Social Security, Medicare, Medicaid and veterans’ benefits account for a growing share of federal expenditure. These costs are rising steadily due to an ageing population and higher healthcare expenses. At the same time, limited revenue growth and earlier tax cuts have constrained the government’s ability to narrow the deficit.
The result has been a sustained reliance on borrowing. In July alone, the Treasury reported a $432 billion budget deficit, one of the largest monthly shortfalls on record. The deficit for the first 10 months of fiscal 2026 had already exceeded the total gap recorded in fiscal 2025, with two months still remaining in the fiscal year.
Rising interest costs add pressure
A key shift in recent years is the growing share of borrowing used to service existing debt.
As debt levels have increased and interest rates remain elevated, the government’s interest burden has surged to around $1.1 trillion annually, according to Reuters reporting.
In fiscal 2025, interest payments surpassed defence spending. In the first 10 months of fiscal 2026, they also overtook Medicare, making interest the second-largest federal expenditure after Social Security.
This has created a reinforcing cycle: higher debt leads to higher interest costs, which in turn widen deficits and require additional borrowing.
Bond markets demand higher returns
The scale of US borrowing is also beginning to test investor appetite.
The Treasury continues to rely on regular issuance of government securities to fund operations. However, with supply increasing, investors have demanded higher yields to absorb long-term debt.
US Treasury yields have recently climbed to their highest levels in nearly two decades. A $25 billion auction of 30-year bonds cleared at the highest yield since 2021, reflecting growing market sensitivity to the volume of US borrowing.
Higher yields also feed into broader financial conditions, pushing up mortgage rates, corporate borrowing costs and consumer credit.
In response, the Treasury has expanded buyback operations in selected longer-dated securities to support liquidity and stabilise market functioning.
Outlook remains uncertain
The crossing of the $40 trillion mark does not signal an immediate fiscal crisis. The US dollar remains the world’s dominant reserve currency, and Treasury securities continue to serve as the global benchmark safe asset.
However, the pace of debt accumulation is drawing increasing scrutiny. The US took until 1981 to reach $1 trillion in debt. It has since multiplied that figure fortyfold, with the most recent trillion added in a matter of months.
Fiscal observers warn that policy choices are narrowing, with options limited to higher taxes, spending cuts, or continued borrowing at rising cost.
For now, Washington shows little political appetite for major fiscal consolidation. That leaves an increasingly difficult question: not how the US reached $40 trillion in debt, but how long it can continue on the same trajectory before financial pressures force a change.
(With inputs from agencies.)
