U.S. debt hits $40 Trillion!

America’s gross national debt topped $40 trillion for the first time on Wednesday, an ominous milestone for an economy that sits on a shaky fiscal foundation after decades of borrowing to pay for the rising costs of the military, social safety net programs and President Trump’s tax cuts, The New York Times writes.

This year alone, the United States is on track to borrow more than $2 trillion to help pay for its obligations, including spending on the war in Iran and the sweeping tax cuts that Republicans enacted in 2025. Soaring interest payments to investors who have purchased America’s debt now make up about half of that red ink, pushing the United States into a deeper financial hole.

“The scariest thing about this is how we’re starting to see the debt spiral begin,” said Marc Goldwein, senior policy director for the Committee for a Responsible Federal Budget, which supports deficit reduction, referring to interest on the debt.

The inability of lawmakers to confront the debt comes with long-term risks. While the United States remains the world’s largest economy, its mounting debt load could lead investors to demand higher interest rates for U.S. bonds or raise questions about the nation’s creditworthiness, which could erode confidence in the dollar as the world’s reserve currency.

President Trump has promised to restore fiscal order, yet many of his policies have only exacerbated America’s financial woes.

When he first ran for the White House in 2016, Mr. Trump said he would eliminate the national debt within eight years by making new trade deals and jump-starting economic growth. Since then, the national debt has doubled.

In his second term, Mr. Trump’s biggest initiatives to cut spending and increase revenue have failed to materialize.

Treasury Secretary Scott Bessent, who set a goal of reducing the deficit to 3 percent of gross domestic product by 2028 from over 6 percent when Mr. Trump took office, acknowledged last week that deficits were going in the wrong direction this year.

In an interview with Newsmax, Mr. Bessent offered several reasons to explain why deficits are growing. He said that spending associated with the war with Iran had forced the country to spend more on the military, and that tariff refunds had undercut the Trump administration’s progress toward reducing the deficit as a share of gross domestic product in 2025. The war in Iran, which has caused energy prices to rise in the United States, has also been a drag on economic growth and diminished the expansion that Trump administration officials had hoped would increase tax revenue.

And on Wednesday, Mr. Bessent said the Treasury Department would double the amount of its own debt that it is permitted to buy back from investors in a bid to contain borrowing costs.

Traders in the Treasury market have often brushed aside concerns about the amount of U.S. government debt outstanding. There is no market that is as deep, liquid or central to the global financial system, meaning there are few real competitors and it would take a seismic shift to suddenly deter buyers in a material way.

But changes are potentially afoot that have kept investors on edge. One source of uncertainty stems from the Federal Reserve, which maintains a $6.8 trillion portfolio of government bonds and mortgage-backed securities.

Kevin M. Warsh, who took over as chairman in May, has made it a top priority to reduce those holdings, which grew primarily during past crises as the Fed stepped in to shore up markets. Mr. Warsh has yet to lay out a specific plan and is likely to wait until the task force he charged with reviewing the balance sheet completes its work by year-end.

In the meantime, the costs of funding the military and paying for programs such as Social Security, Medicare and Medicaid continue to rise, and lawmakers facing elections are loath to push too hard for spending cuts or tax increases.

“Our federal programs spend much more than the government takes in, and the biggest-ticket items in the federal budget are all running on autopilot,” said Margaret Spellings, president of the Bipartisan Policy Center, a think tank. “Even in the rosiest scenarios, we’re speeding toward a cliff and refusing to turn the wheel.”

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