US national debt crosses $40 trillion threshold as interest costs surge

US national debt crosses $40 trillion threshold as interest costs surge

The United States national debt surpassed $40 trillion on Wednesday, August 19, marking an unprecedented milestone as the federal government grapples with mounting costs from defense operations, entitlement programs and the accelerating burden of interest payments on borrowed money.

The debt threshold was reached just five months after hitting $39 trillion in March, and five months before that it stood at $38 trillion in October, illustrating the rapid pace of accumulation. The figure represents total outstanding obligations owed by the federal government to creditors.

Interest payments now third-largest federal expense

Interest on the national debt is projected to total $1.0 trillion in fiscal year 2026, making it the third-largest category of federal spending behind only Social Security and Medicare. These interest costs are set to exceed Medicare spending by 2028, becoming the second-largest federal expenditure. Over the next decade, interest payments are projected to double to $2.1 trillion by 2036, growing faster than any other major budgetary category at a rate of 106 percent.

The Trump administration defended its fiscal approach while acknowledging the challenge. Kush Desai, a White House spokesman, said the administration

has been focused on slashing waste, fraud, and abuse in federal spending while accelerating economic growth to get America's debt-to-GDP ratio trending in the right direction.

Social Security consumed 22.5% of the federal budget in fiscal year 2025, totaling $1,581 billion, while Medicare accounted for 14.2%, or $997 billion. These entitlement programs, combined with defense costs related to President Donald Trump's ongoing Iran military operations now approaching six months, continue driving the debt higher.

Economic consequences already affecting Americans

Financial experts warn the exploding debt is already imposing costs on ordinary Americans through higher borrowing rates for mortgages and automobiles, suppressed wages as businesses have less capital available for investment, and increased prices for goods and services. Interest costs as a share of the economy reached 3.2% of GDP in 2025, matching the post-World War II record from 1991, and are projected to climb to 4.6% of GDP by fiscal year 2036.

By 2036, interest payments are projected to consume one-quarter of all federal revenue, up from approximately one-fifth today and one-tenth in 2021. Through the tenth month of fiscal year 2026, interest payments were already 10.6% higher than the previous year, driven by both the larger debt burden and elevated long-term interest rates.

The federal debt is already raising the cost of living and choking out other spending and investment, threatening our economy and Americans' long-term prosperity. Our current fiscal trajectory is plainly unsustainable, and that's the best-case scenario. AI disruption, a recession, global war, or any number of other events could quickly push us over the edge from a challenge into a full-blown crisis.

Margaret Spellings, president and CEO of the Bipartisan Policy Center, warned of the mounting risks.

Debt-to-GDP ratio reaches historic level

The U.S. debt-to-GDP ratio reached 100.2% in the first quarter of 2026, marking the first time since the end of World War II that debt exceeded the size of the economy outside of a brief period during the COVID-19 pandemic. The Congressional Budget Office projects this ratio will climb to 120% of GDP by 2036, surpassing even the post-World War II record of 106%.

According to the OECD's 2025 Government at a Glance report, the United States recorded the highest combined budget deficits among member nations at 7.6% of GDP in 2023, compared to the OECD average of 4.6%. The U.S. also spent 4.0% of GDP on interest costs, the most among OECD countries, compared to the 2.3% average.

Debt ceiling confrontation looming

The United States is subject to a statutory debt limit that Congress has the authority to set, adjust or abolish. The current debt ceiling stands at $41.1 trillion, established by legislation signed in July 2025. The debt ceiling has been raised or modified at least 98 times since 1945.

The Bipartisan Policy Center estimates the federal government will most likely reach this $41.1 trillion limit sometime between late winter and mid-summer of 2027, requiring Congress to again vote on whether to raise or suspend the borrowing cap.