U.S. government debt crossed $40 trillion on Tuesday, according to Treasury Department data, after doubling over the past decade. The milestone comes alongside the highest monthly budget deficit in more than five years and surging Treasury yields, prompting the Treasury to expand its bond repurchases at the long end of the curve.
Total U.S. government debt reached $40.05 trillion as of Tuesday, the Treasury Department reported, just four and a half years after the debt topped $30 trillion. Gross federal debt has grown by $3tn over the past year, its fastest pace ever outside the pandemic era, according to FT calculations.
A decade of doubling
Ten years ago, the debt level stood at $19.4 trillion. Years of escalating budget deficits, pushed higher by pandemic-era stimulus, have left the public share of the debt near 100%. Debt held by the public now exceeds $32 trillion, roughly equal to the size of the U.S. economy, according to the FT.
According to the Financial Times: “It’s that gigantic flashing ‘check engine’ light,” said Marc Goldwein, senior policy director at the Committee for a Responsible Federal Budget. He added that it isn't just the size of the debt but the speed at which it has been reached.
Deficit and yields climb together
Treasury reported a $432.3 billion deficit in July, the highest monthly total since March 2021, with the year-to-date shortfall nearing $1.8 trillion. Treasury yields have surged since late June, hitting levels not seen since before the global financial crisis. However, concerns over the debt-and-deficit situation, along with surging corporate bond issuance tied to artificial intelligence investment, rising term premia and worries over the Fed's inflation-fighting commitment, have pushed yields higher.
Interest on the debt has totaled nearly $1.2 trillion this year, the largest budget expenditure outside Social Security and Medicare. As a result, the Treasury said Wednesday it would double its purchases of long-term government debt in a bid to contain a recent sell-off. Last week, the U.S. paid its highest borrowing costs to sell 30-year bonds since 2001, while a 10-year note auction fetched the highest yields since 2007.
Political vows collide with spending
The Congressional Budget Office expects debt held by the public to exceed the post-World War II high of 106% of GDP by the end of the decade and reach 120% by 2036. Treasury Secretary Scott Bessent has vowed to curb the budget deficit to 3% of GDP by the end of President Trump's term. But tax cuts in the 2025 budget law are set to push up debt by more than $4 trillion by 2034, while Trump has also called for annual defense spending to rise to $1.5 trillion.
The national debt has increased by about $7.9 billion per day over the past year, or roughly $91,000 per second, according to Congress's Joint Economic Committee.
Sources: CNBC, Financial Times
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