The U.S. national debt has surged past $40 trillion in the first 19 months of Donald Trump's second term, even as bond yields climb. Federal spending has grown rather than shrunk, and a cost-cutting drive led by Elon Musk reported far less in savings than pledged. Budget experts say the strain will likely force tax hikes or cuts to programs including Social Security.
The national debt has surged past $40 trillion in the first 19 months of Trump's second term, according to Reuters. He returned to the White House pledging to shrink the federal government, end costly wars, and spur growth to tame deficits. Instead, spending has grown, and the six-month-old Iran war has become an expensive stalemate.
Meanwhile, the cost of servicing the debt has climbed as yields on some U.S. bonds hit their highest levels in nearly two decades. Budget experts say the result is a looming fiscal crunch that will likely force Congress and a future president to raise taxes or trim the social safety net, potentially including Social Security.
Tax cuts widened the shortfall
Trump's first-term tax cuts added $8.4 trillion in debt, according to the Committee for a Responsible Federal Budget. His second-term tax and immigration law added another $4.7 trillion, according to the Congressional Budget Office. White House spokesman Kush Desai said Trump was the first president to seriously take on waste, fraud, and abuse across the federal government, pointing to firings of federal workers and eliminated programs.
Congressional Republicans, working with Trump, did shrink the annual deficit in 2025, but only by a marginal amount, even as the overall debt kept growing.
A cost-cutting drive that fell short
Trump commissioned Elon Musk to lead the now-defunct U.S. Department of Government Efficiency, and Musk pledged to cut $2 trillion from the budget. The agency ultimately reported $110 billion in savings, a figure the Government Accountability Office said relied on overstated or unverifiable claims.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said cutting taxes is possible, but only if paired with spending cuts — and that pairing has not happened.
Betting on growth against Fed warnings
Trump has said growth alone can resolve the debt problem, telling reporters his policies could push economic output up 20% annually, a feat achieved only once since 1947, during the Q3 2020 rebound from pandemic shutdowns. That optimism clashed with Federal Reserve Chair Kevin Warsh, who told the G20 finance ministers' meeting that record AI and technology investment is forcing governments and companies to compete for the next investment dollar, driving up rates and worsening the government's financing problem.
William Emmons, former system vice president of the Federal Reserve Bank of St. Louis, said Trump inherited a difficult budget environment but made it worse. According to Reuters: "He made a bad situation worse."
Stakes rise ahead of the midterms
The debt milestone lands ahead of November's midterm elections, which will decide whether Republicans keep control of Congress for the rest of Trump's term. Voters may not focus on the debt directly, but the fallout reaches them through mortgage rates tied to government bond yields and inflation outpacing wage gains.
Source: Reuters via Investing.com
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