US national debt passes $40tn after doubling in a decade

US National Debt Exceeds $40 Trillion Mark After Doubling in Ten Years

US national debt has risen above $40 trillion, more than doubling from levels recorded a decade earlier, according to Treasury Department data released on 18 August. The total stood at $40.05 trillion on that date, encompassing all outstanding Treasury bonds, bills and notes.

In 2016 the debt was just under $20 trillion. The Congressional Budget Office had projected overall borrowing would reach $39.6 trillion by the end of fiscal year 2026. Actual figures exceeded that estimate, bringing the debt closer to the statutory limit of $41.1 trillion. The CBO has separately projected the debt will reach approximately $64 trillion by 2036.

The increase occurred during the administrations of both President Trump and President Biden and reflects sustained budget deficits together with higher interest payments on existing obligations. The debt-to-GDP ratio reached 125.8 percent, according to International Monetary Fund data. For comparison, the IMF lists the United Kingdom at 103.6 percent, China at 106.9 percent and Japan above 200 percent.

The Treasury Department announced on 19 August that it would increase its buyback operations for longer-term bonds from $2 billion to at least $4 billion per week, effective from 9 September through 4 November. Officials described the step as intended to support liquidity in the market for those securities. Following the announcement, the yield on 30-year Treasury bonds eased to 5.18 percent.

John Canavan, lead analyst at Oxford Economics, stated that the expanded purchases appeared aimed at easing pressure on long-term borrowing costs, which had been influenced by rising oil prices, inflation risks and heavy issuance by governments and corporations worldwide. He added that the scale of the increase was unlikely to deliver substantial long-term relief given the size of outstanding Treasury debt.

Rene Albrecht, senior analyst at DZ Bank, said the Treasury action reflected concern over sustained yields at or above 5 percent, which would raise costs for both the government and private borrowers. He noted the timing, three months before the midterm elections.

Economist Mohamed A. El-Erian observed that the purchases could reduce longer-term yields in the near term and thereby lower mortgage and other borrowing costs, while also carrying risks of collateral effects and unintended consequences. He suggested the move might form part of a broader approach to managing the yield curve.

The average interest rate on 30-year fixed-rate mortgages stood at 6.67 percent, according to Freddie Mac data. That rate is below the 7.7 percent average recorded in 2023.

Minutes from the Federal Reserve’s most recent policy meeting, released on 19 August, indicated that several participants had favored an increase in the benchmark interest rate at the prior gathering. The Federal Open Market Committee maintained the target range at 3.50 percent to 3.75 percent for the fifth consecutive meeting. Participants noted that further rate increases would likely be required if inflation did not continue to moderate toward the 2 percent target. Recent data showed a slight easing in inflation and an unexpected decline in payroll employment in July. The central bank is expected to leave rates unchanged at its September meeting.

Economics professor David Jacks of the National University of Singapore stated that difficulties in managing the debt could eventually produce disruptions comparable in scale to the 2008 financial crisis, though immediate effects on households remain limited. He added that the accelerating pace of debt accumulation means repayment obligations will eventually require attention.

The Treasury’s buyback program and the Federal Reserve’s policy stance continue to operate against a backdrop of persistent deficits and elevated interest costs.