US National Debt Surpasses $40 Trillion, Doubling in a Decade

The US national debt has surpassed $40 trillion, a milestone that reflects the country's heavy spending over the past decade. According to Treasury figures, the national debt has more than doubled in the past 10 years, reaching a total of $40.05 trillion as of August 18.

This rise in debt is attributed to years of heavy spending under both the Donald Trump and Joe Biden administrations, as well as higher interest payments that have steadily added to the total. In 2016, the national debt stood at just under $20 trillion.

The Congressional Budget Office (CBO) had projected overall borrowing to reach $39.6 trillion by the end of fiscal year 2026, but the actual figure has surpassed this projection. The CBO also projects that the US is nearing its $41.1 trillion debt ceiling, with debt expected to climb to about $64 trillion by 2036.

The rapid rise in debt has sharpened concerns about how quickly the government's borrowing needs are growing and what this means for future interest costs. As the federal government spends more to cover its budget deficits, consumers have faced higher interest rates and inflation.

The interest rate on 30-year bonds, a type of debt used to raise funds from investors, has hit 5.34%, the highest level in almost 20 years. This rate influences how much the US government, companies, and consumers pay to borrow, affecting mortgages, car loans, and credit cards.

Economists have expressed concerns over the government's debt and the huge amounts of cash being borrowed by tech firms to develop artificial intelligence (AI), with the timeline and level of returns on investment uncertain. While ordinary people are unlikely to be affected immediately, difficulties in managing the debt could eventually trigger disruptions on a scale similar to the 2008 financial crisis.

The Treasury Department has announced plans to increase its buyback operations by "at least double" from $2 billion to $4 billion, effective from September 9 to November 4. This move is intended to provide greater liquidity support for longer-term bonds and ease borrowing costs over 30 years.

However, some analysts have questioned the effectiveness of this move, with John Canavan, lead analyst at Oxford Economics, stating that the increase in buybacks is "unlikely to provide meaningful long-term relief" given the size of outstanding Treasury debt.

Rene Albrecht, senior analyst at DZ Bank in Germany, has also expressed concerns, stating that the US government fears the "pain of 5% or higher yields" over the long term, not just because it raises borrowing costs for the government, but also for the private sector.

The US debt-to-gross domestic product (GDP) ratio is 125.8%, according to the International Monetary Fund (IMF), one of the highest among the world's largest economies. In comparison, the UK and China's debt-to-GDP ratios are 103.6% and 106.9%, respectively.

| Debt-to-GDP Ratio | Country | | --- | --- | | 125.8% | United States | | 103.6% | United Kingdom | | 106.9% | China | | 200%+ | Japan |

The Federal Reserve has also released minutes from its last meeting, revealing that concerns over inflation deepened among policymakers. The central bank ended up holding its benchmark interest rate in the current 3.50%-3.75% range for the fifth time in a row.

Many participants also said rate hikes would "likely be necessary if inflation did not decline", with some suggesting interest rates were not high enough to see price rises fall back to the Fed's 2% target for inflation.