The U.S. national debt has crossed the $40 trillion mark for the first time, but the milestone is increasingly being overshadowed by a more immediate problem: the government is paying more to keep borrowing as investors demand higher returns on Treasury bonds.
Treasury data showed total outstanding federal debt at $40.047 trillion on Tuesday, comprising $32.266 trillion held by the public and $7.782 trillion in intragovernmental holdings. The debt has more than doubled from $19.95 trillion in January 2017, when Donald Trump began his first presidency.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, called the milestone a warning that extends beyond Washington’s balance sheet. “Forty trillion dollars of debt doesn’t exist solely on the government’s ledgers; it is felt throughout the economy.”
She warned that heavier borrowing could “exacerbate inflation,” squeeze other government priorities and leave the country “vulnerable to emergencies at home and turmoil abroad.”
Debt Is Now Feeding The Interest Bill
The most striking change is the cost of servicing the mountain of debt.
The Congressional Budget Office projects net interest payments of $1 trillion in fiscal 2026, rising to $2.1 trillion by 2036. Interest costs alone are projected to rise from 3.3% to 4.6% of GDP over that period.
CBO projects the federal government will spend $7.4 trillion in fiscal 2026 while collecting $5.6 trillion, leaving a $1.9 trillion deficit. Debt held by the public is projected at 101% of GDP this year and 120% by 2036.
The latest monthly numbers underline the pressure. The government posted a $432 billion deficit in July, taking the fiscal-year gap to $1.799 trillion, already above the entire $1.775 trillion deficit recorded in fiscal 2025.
Bond Market Is Sending A Warning
Investors are increasingly demanding compensation for holding long-term U.S. debt. The 30-year Treasury yield recently reached 5.34%, its highest level in 19 years, while foreign investors’ share of Treasury holdings has declined.
Treasury Secretary Scott Bessent responded by doubling planned buybacks of 10- to 30-year Treasury securities to at least $4 billion per operation, beginning in September.
The move briefly pushed long-term yields lower, but analysts cautioned that buybacks cannot solve the underlying fiscal imbalance.
President Trump, meanwhile, dismissed concerns over bond-market volatility. “I don’t think so at all. I think we have a very powerful country.” He added that when the country is strong, “interest rates should go down.”
The Next Trillion-Dollar Problem
The debt surge is not solely a Trump-era phenomenon. Public debt increased about $8.4 trillion during Joe Biden’s presidency, while it has risen $11.6 trillion across Trump’s two terms, including pandemic-era borrowing.
But Trump’s 2025 reconciliation law adds another layer. The CBO estimates the legislation will increase cumulative deficits by $4.7 trillion between 2026 and 2035, including higher debt-service costs.
That creates a difficult feedback loop: larger deficits require more borrowing, more borrowing can push yields higher, and higher yields make the existing debt increasingly expensive to service.
For households, that pressure can eventually show up through mortgage, auto and business-loan rates. For Washington, it means an increasing share of every future budget dollar could go toward yesterday’s borrowing rather than tomorrow’s priorities.
The $40 trillion milestone, therefore, is less a symbolic number than a warning about the price of postponing fiscal decisions.
