US National Debt Hits $40 Trillion Milestone

The Federal government of the United States has reached a national debt milestone of $40 trillion, surpassing the country's overall gross domestic product and exceeding the debt-to-GDP ratio recorded at the end of World War II. This surge has pushed long-term interest rates to their highest level in nearly two decades, increasing mortgage costs and reducing housing affordability for households.

Debate over the drivers of this debt centers on fiscal policy. Critics point to massive tax cuts enacted during the George W. Bush and Donald Trump administrations, specifically the One Big Beautiful Budget Act, which is estimated to have caused a net loss of $4.7 trillion to the Treasury over a decade. The debt increased by $11.6 trillion during Donald Trump's first term and is projected to rise by nearly $8 trillion during his second term, fueled by a proposed $1.5 trillion annual defense budget and further corporate tax cuts expected to add $3.4 trillion over ten years. For comparison, the federal debt rose by $8.4 trillion during Joe Biden's four-year term.

Economic pressures have been compounded by inflation linked to tariff strategies and military actions in Iran. While Treasury Secretary Scott Bessent attempted to lower interest rates by increasing purchases of Treasury securities, these efforts failed to move the market. Meanwhile, Federal Reserve Chairman Kevin Warsh indicated that rates may need to rise further to combat inflation. Projections suggest that by the mid-2030s, annual interest payments on the federal debt will exceed $2 trillion.