US national debt surpasses $40 trillion as borrowing costs rise

The US national debt has surpassed $40 trillion for the first time, according to Treasury Department data released on Wednesday, as borrowing costs continue to climb.

US Treasury debt reached $40.047 trillion after the issuance of short-term bonds on Tuesday, fueled by increased borrowing for healthcare and Social Security, as well as rising interest payments.

This surge has outpaced projections by the Congressional Budget Office, which had forecast the debt would reach $39.4 trillion by the end of the current fiscal year. The development comes amid concerns over inflation driven by the conflict in the Middle East and higher energy prices, which have pushed borrowing costs to levels not seen in years.

Yields on 30-year US Treasury bonds rose on Tuesday to their highest since 2007, prompting the government to increase spending to refinance its debt at higher interest rates, further worsening indebtedness. On Wednesday, the Treasury Department announced larger buybacks of long-term bonds starting in September, helping to ease interest rates and reassure investors.

Jessica Riedl, a budget and tax researcher at the Brookings Institution, noted that the pace of the federal deficit is unsustainable. US debt is now more than double its level since the 2008 crisis, reaching about 125% of GDP. The current deficit stands at 7 to 8% of GDP, compared to previous concerns at 3 to 4%, raising alarm in financial markets.

Democratic Senator Mark Kelly recalled that former President Donald Trump had pledged to pay off the debt during his first term, but left it at $40 trillion. Meanwhile, Republican Senator Rick Scott called on Congress to rein in spending and balance the budget. Treasury Secretary Scott Besant has said his goal is to reduce the deficit to 3% of GDP, but the gap has recently widened due to companies reclaiming tariffs overturned by the Supreme Court in February, increased military spending—especially due to the conflict with Iran—and tax cuts that have reduced Treasury revenues.

Analysts note there is no specific debt-to-GDP ratio that automatically triggers a crisis, but debt held by the public is considered the most significant economic indicator. Riedl believes these psychological signals serve as a warning for financial markets. Caleb Quakenbush, director of fiscal policy at the Bipartisan Policy Center, explained that federal government borrowing surged during the 2007-2009 financial crisis and again during the COVID-19 pandemic, without sustainable action from Congress or US administrations, which could lead to serious problems if another crisis occurs.