US National Debt Hits $40 Trillion as Interest Costs Surge

The United States federal government saw its national debt surpass $40 trillion by August 2026, exceeding the total size of the U.S. economy. This milestone has pushed annual interest payments above $1 trillion, making debt service the government's second-largest expense after Social Security. The Congressional Budget Office reported a 14% increase in federal interest costs during the first 10 months of fiscal 2026, driven by expanding debt and rising Treasury yields.

Treasury Secretary Scott Bessent has implemented several measures to manage these costs, including an expanded bond buyback program and a strategy to purchase 10-year Treasuries while selling shorter-term bonds to lower average yields. Additionally, the Treasury took steps to support the Japanese yen to discourage Japan from selling U.S. Treasurys. Despite these efforts, the budget deficit grew 10% to $1.8 trillion through July.

Economic modeling from The CEO Center indicates that rising federal borrowing directly increases interest rates for mortgages, student loans, and car loans. Fiscal watchdogs and policymakers warn that the debt is growing faster than the economy, with projections suggesting it will grow twice as fast over the next decade. While Republicans favor spending cuts and Democrats advocate for expanding the tax base through social investments, the White House is developing a formal debt plan to address a $2 trillion annual budget gap.