The U.S. national debt crossed $40 trillion for the first time Thursday, marking a more than doubling of federal borrowing in less than a decade and intensifying concerns about rising interest costs and Washington's approach toward its next debt-ceiling deadline.
The Treasury Department's latest daily cash and debt statement put total federal debt at $40.07 trillion, according to Reuters. The milestone comes as higher interest rates make servicing that debt increasingly expensive and Treasury yields remain elevated across longer maturities.
Roughly one-third of the increase in debt over the past decade occurred during the Covid-19 pandemic, when the administrations of President Donald Trump and former President Joe Biden borrowed heavily as Washington sought to prevent a deeper economic collapse. Emergency spending, tax measures and other support programs added trillions of dollars to federal obligations.
The borrowing continued after the immediate pandemic crisis subsided, leaving Washington with a substantially larger debt load at a time when financing costs have climbed. Fiscal watchdogs have warned that stabilizing the trajectory would eventually require some combination of spending reductions and higher government revenue.
The cost of carrying the debt is becoming a central part of the problem. The Congressional Budget Office projects annual net interest payments will exceed $1 trillion this year, putting debt-service costs roughly on the scale of the Pentagon's budget.
Interest expenses already absorb about 19% of federal revenue, according to the Peter G. Peterson Foundation. If current trends persist, that share is projected to reach 26% by 2036, leaving less fiscal room for defense, healthcare, Social Security and other government priorities without additional borrowing or revenue.
The $40 trillion milestone also leaves the federal government less than $1.1 trillion below its statutory borrowing limit. Congress increased the debt ceiling to $41.1 trillion last year, but the rapid accumulation of debt means lawmakers could face another confrontation sooner than previously anticipated.
Preliminary estimates from the Bipartisan Policy Center indicate the government could reach the borrowing limit sometime between late winter and midsummer 2027. The latest borrowing figures are shifting expectations toward the earlier portion of that range.
Bond markets are already reflecting concerns over government borrowing, inflation and interest-rate policy. CNBC reported that the yield on the 30-year Treasury bond rose 5.7 basis points Thursday to 5.251%, reversing a decline that followed the Treasury Department's announcement that it would increase debt repurchases.
The 30-year bond has been a particular focus because longer-dated securities are highly sensitive to investors' expectations for inflation, fiscal deficits and the supply of government debt. Treasury's repurchase program had initially provided some relief, but Thursday's rebound underscored the continuing upward pressure on yields.
The benchmark 10-year Treasury yield also moved higher, climbing more than 5.1 basis points to 4.704%, according to CNBC. Higher Treasury yields can feed directly into borrowing costs across the economy, influencing mortgage rates, corporate financing and other forms of credit.
Trump played down concerns about the $40 trillion figure when questioned by reporters, instead focusing on what he described as excessively high interest rates.
"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. Look, when our country is strong, interest rates should go down," Trump said.
The president's argument puts additional attention on monetary policy, but lower interest rates alone wouldn't resolve the underlying gap between federal spending and revenue. The government must continually refinance maturing securities while issuing additional debt to cover new deficits, making both the size of annual borrowing and the interest rate demanded by investors increasingly consequential.
