The US national debt has reached $40 trillion for the first time, highlighting the growing pressure on Washington as government spending continues to exceed federal revenues and interest payments climb.
The Treasury confirmed that gross federal debt crossed the milestone this week after increasing by $1 trillion in less than five months. The debt has doubled over the past decade and quadrupled in less than 20 years.
The latest increase comes as long-term US Treasury yields have reached their highest levels in years. Investors have been watching inflation, geopolitical tensions and the government’s expanding borrowing needs, all of which can influence the cost of financing federal debt.
Interest payments have become one of the largest expenses in the federal budget. The government now spends more than $1 trillion a year on interest, adding to the deficit and creating a need for further borrowing when tax revenues are insufficient.
Dan Coatsworth, head of markets at AJ Bell, said the $40 trillion debt was equivalent to more than 615 million years of earnings for an average US worker based on average salaries.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said the debt affects the wider economy and ultimately reaches households through higher costs and reduced government spending options.
The US has the world’s largest government debt in absolute terms, although its debt burden is better measured against the size of the economy. The IMF expects US general government debt to reach $40.7 trillion in 2026, compared with nominal GDP of $32.4 trillion, putting debt at about 126% of economic output.
The $40 trillion figure includes debt held by the public as well as money owed by one part of the federal government to another. More than $32 trillion is held by investors outside the federal government.
US investors, including banks, pension funds, mutual funds, insurance companies, households and government institutions, held about 76% of federal debt at the end of June. Foreign investors held roughly $9.27 trillion, or 24.1%.
Japan was the largest foreign holder, with about $1.12 trillion in US Treasury securities.
Washington continues to borrow because spending exceeds revenue. The federal deficit is projected to reach about $1.9 trillion in fiscal 2026, while government spending is expected to total around $7.4 trillion against revenues of about $5.6 trillion.
The Congressional Budget Office has warned that the current fiscal path is unsustainable. It expects gross federal debt to approach $64 trillion by 2036.
Meanwhile, the 30-year Treasury yield briefly reached about 5.34%, its highest level since 2007. Higher government borrowing costs can increase financing expenses for businesses and households, including through higher mortgage rates.
Although investors do not currently expect a US debt default, economists and fiscal watchdogs are urging Washington to address persistent deficits before rising interest costs place greater pressure on future budgets.
