America's debt hits a staggering $40 trillion for the first time. Is the US heading for a crisis?
&imwidth=600&imheight=450&format=webp&quality=medium "America's debt hits a staggering $40 trillion for the first time. Is the US heading for a crisis?")
US President Donald Trump delivers remarks during a meeting with cryptocurrency executives in the Roosevelt Room of the White House in Washington, DC, on August 19, 2026. Photograph: (AFP)
America's debt has crossed a number once considered almost unimaginable. With borrowing costs rising and annual deficits still running into trillions, the US has now crossed the $40 trillion mark. But does that mean a debt crisis is coming?
The United States' gross national debt has crossed the $40 trillion mark for the first time, according to data from the US Treasury Department. The whopping debt highlights the growing pressure on government finances as borrowing costs rise and long-term spending commitments expand.
Total public debt outstanding reached $40.05 trillion at the close of business Tuesday (Aug 18). The figure is higher than an earlier Congressional Budget Office forecast, which had projected that total borrowing would reach $39.4 trillion by the end of fiscal year 2026.
Also read | Trump announces ‘crushing’ economic campaign against Iran, threatens allies with ‘tremendous’ penalties
Why is US debt rising?
The US government routinely borrows to cover the gap between its spending and revenue. But the scale of that borrowing has grown sharply in recent years.
Long-term obligations linked to Social Security and healthcare are increasing, while higher interest rates have made servicing existing debt more expensive. Government spending, including costs linked to the war in the Middle East, and tax cuts have added to the borrowing requirement.
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Jessica Riedl, a budget and tax fellow at the Brookings Institution, said the US has been running deficits of roughly $2 trillion even during periods of peace and economic growth.
"Over the last few years, the United States has moved into roughly $2 trillion deficits, even during peace and prosperity," she told AFP.
Riedl noted that deficits that once stood at around 3 per cent to 4 per cent of GDP are now closer to 6 per cent to 7 per cent, making financial markets increasingly nervous.
Higher interest costs add to the pressure
The rise in debt comes as investors are already concerned about inflation, government spending, and the economic impact of the war in Iran.
Long-term Treasury yields rose Tuesday to their highest level since 2007, increasing the cost of refinancing government debt. The Treasury moved to calm the long-term bond market early Wednesday, sending yields lower.
Higher borrowing costs do not affect the government alone. If Treasury yields remain elevated, consumers and businesses could also face more expensive borrowing, potentially weighing on economic growth.
Is $40 trillion a crisis?
The $40 trillion milestone is significant, but it does not automatically mean the US is facing a debt crisis.
Economists generally consider debt held by the public more meaningful when assessing the economic impact of government borrowing than gross national debt. Still, the milestone is a warning sign for financial markets.
"It has made markets more nervous," Riedl said, adding that such landmarks can prompt investors to take another look at the country's borrowing trajectory.
Caleb Quakenbush of the Bipartisan Policy Center said US spending trends have not been addressed by Congress or successive administrations in a "meaningful or durable way."
The US Treasury has previously set a goal of reducing the federal deficit to 3per cent of GDP, but the latest figures underline the scale of the challenge facing Washington.
