The US national debt has crossed $40 trillion for the first time. Latest Treasury data put total federal debt at roughly $40.05 trillion, including about $32.27 trillion held by the public and $7.78 trillion in intragovernmental holdings. The debt has more than doubled in less than a decade and has climbed another $1 trillion in only a matter of months.
(Source: Trading Economics)
The federal government continues to spend far more than it collects. The Treasury reported a $432 billion budget deficit for July, the largest monthly shortfall since March of 2021. That pushed the fiscal-year-to-date deficit to $1.799 trillion, already above the $1.775 trillion deficit recorded for the entire 2025 fiscal year.
Interest Costs Are Becoming a Bigger Problem
The size of the debt is only part of the pressure. Higher Treasury yields mean maturing government securities are increasingly being refinanced at more expensive rates.
The Congressional Budget Office projects net interest outlays will exceed $1 trillion in fiscal 2026, equal to about 3.3% of GDP. CBO expects those costs to reach $2.1 trillion by 2036 if current policies broadly remain in place.
That creates a difficult feedback loop: larger deficits require more borrowing, while higher borrowing costs add to future deficits.
Bond investors are already demanding more compensation to hold long-term US debt. The 30-year Treasury yield recently reached 5.34%, its highest level since 2007, amid concerns over inflation, government borrowing and the fiscal outlook.
Treasury Responds as Bond Market Pressure Builds
The Treasury responded this week by doubling the size of certain buybacks of 10- to 30-year securities from $2 billion to at least $4 billion per operation. The announcement helped pull long-term yields lower, although the planned repurchases are small compared with the enormous Treasury market.
Washington is also competing for capital with companies issuing debt to finance artificial intelligence infrastructure, adding another source of supply that could keep pressure on long-term borrowing costs.
CBO expects debt held by the public to equal roughly 101% of US GDP in 2026 and climb to 120% by 2036. The bigger question may therefore be less about the $40 trillion milestone itself and more about how expensive it becomes for Washington to keep financing it.
