US Debt Hits $40tn
The US national debt has surpassed $40tn, more than doubling in a decade, according to Treasury figures
The US national debt has reached a milestone of $40tn, more than doubling in a decade. This figure, as of 18 August, covers all outstanding Treasury bonds, bills, and notes, and reflects years of heavy spending under both the Trump and Biden administrations, along with higher interest payments.
Debt Ceiling and Projections
The Congressional Budget Office (CBO) had projected overall borrowing would reach $39.6tn by the end of fiscal year 2026. However, the debt has risen faster than expected, sharpening concerns about the government's borrowing needs and future interest costs. The CBO said the US was nearing its $41.1tn debt ceiling, with debt projected to climb to about $64tn by 2036.
Comparative Debt-to-GDP Ratios
The amount the US owes compared to its annual economic output, known as its debt-to-gross domestic product (GDP) ratio, is 125.8%, according to the International Monetary Fund (IMF). This is one of the highest among the world's largest economies. In comparison, the debt-to-GDP ratios of other countries are:
| Country | Debt-to-GDP Ratio |
|---|---|
| US | 125.8% |
| UK | 103.6% |
| China | 106.9% |
| Japan | over 200% |
Interest Rates and Borrowing Costs
The interest rate on 30-year bonds hit 5.34% on Tuesday, the highest level in almost 20 years. This has been driven by rising oil prices and concerns over inflation. The recent surge in bond yields has affected how much the US government, companies, and consumers pay to borrow, influencing mortgages, car loans, and credit cards. The average interest rate on 30-year fixed mortgages is currently 6.67%, according to finance firm Freddie Mac.
The Treasury Department announced that it would increase its buyback operations by at least double, from $2bn to $4bn, from 9 September to 4 November, in an attempt to provide relief on long-term borrowing costs. However, analysts such as John Canavan and Rene Albrecht have expressed doubts about the effectiveness of this move in providing meaningful long-term relief, given the size of outstanding Treasury debt. Economist Mohamed A El-Erian suggested that the move might be part of a broader strategy to keep control of interest rates, known as yield curve control. The Federal Reserve, which sets US interest rates, has also expressed concerns over inflation, with some participants suggesting that rate hikes would likely be necessary if inflation did not decline.
