Key Takeaways
- US national debt has crossed $40 trillion for the first time.
- Publicly held debt accounts for about $32.3 trillion of the total.
- The 30-year Treasury yield recently reached its highest level in 19 years.
US government debt has surpassed $40 trillion, highlighting growing fiscal pressures as rising borrowing costs, shaped in part by years of central-bank tools like quantitative easing, add to the cost of servicing federal debt.
US debt reaches a new milestone
The US national debt crossed the $40 trillion mark in August, marking a major increase in federal borrowing. Treasury data put total outstanding debt at about $40.05 trillion on Aug. 19. The figure includes debt held by the public and debt held within the federal government.
Publicly held debt stood at about $32.3 trillion. The remaining amount represents government accounts that hold federal debt, including trust funds. Economists often focus on publicly held debt because it better reflects the amount the government owes to outside investors.
The $40 trillion figure itself does not trigger an immediate economic change. However, the rapid growth in the US national debt has increased attention on the government’s long-term finances.
Rising debt meets higher borrowing costs
The debt milestone comes as investors demand higher returns on longer-term US government bonds. The 30-year Treasury yield reached about 5.3% earlier this week, its highest level since 2007. Higher yields can increase the government’s cost of financing new debt and refinancing existing obligations.
The increase has also affected borrowing costs across the economy because Treasury yields influence rates for mortgages, business loans and other forms of credit. Higher interest costs can put additional pressure on the federal budget as the government’s debt grows.
The Treasury moved to support liquidity in the long-term bond market after yields climbed. It announced that it would at least double the size of some buyback operations for longer-dated Treasury securities, raising purchases from $2 billion to at least $4 billion per operation.
The move helped push the 30-year yield lower on Wednesday. The yield later traded around 5.2%, showing that borrowing costs remained elevated even after the market response.
Why the debt keeps growing?
The US has added more than $20 trillion to the US national debt since 2017. Large spending during the COVID-19 pandemic played a major role in the increase, while continuing budget deficits have kept debt rising. Social Security, Medicare, and interest payments also account for large and growing parts of federal spending.
Interest costs have become a major budget pressure as both debt levels and borrowing rates have increased. This creates a difficult cycle because higher interest payments leave less room for other federal priorities while continued deficits require further borrowing.
The government can still borrow at scale because US Treasury securities remain widely held by investors. However, continued debt growth means the government faces greater exposure to changes in interest rates and investor demand.
The $40 trillion milestone therefore serves mainly as a measure of the scale of US borrowing and the growing US national debt, a figure updated daily in the Treasury’s public debt data. The bigger challenge lies in the continued gap between federal spending and revenue, which could keep increasing debt and interest costs in the years ahead.
