The total US federal debt has crossed the US$40 trillion mark for the first time, raising fresh concerns about the country’s worsening fiscal position. The US Treasury Department reported that total public debt reached US$40.047 trillion on Tuesday, August 18. The figure includes US$32.266 trillion in Treasury securities held by the public and US$7.782 trillion in debt held by government accounts.

The US government’s debt has more than doubled in less than a decade. It stood at US$19.95 trillion when Donald Trump began his first presidential term in January 2017. Around one-third of the increase came from heavy borrowing used to finance the Covid-19 response under Trump and former President Joe Biden. The remaining rise reflects policy decisions of both administrations and long-standing gaps between government spending and tax revenues.

Fiscal watchdog groups had expected the US$40 trillion milestone for several weeks. They have warned that the country could face a serious debt crisis unless lawmakers take action. Possible measures include raising taxes, reducing spending or using a combination of both to bring government finances under control.

“Forty trillion dollars of debt doesn’t exist solely on the government’s ledgers; it is felt throughout the economy and finds its way to the pocketbooks of people one way or another,” said Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget.

“The more we borrow, the more we exacerbate inflation, squeeze out other priorities in the budget, and leave ourselves vulnerable to emergencies at home and turmoil abroad,” MacGuineas said in a statement just after the Treasury data was released.

MacGuineas noted that the debt reached US$40 trillion less than five months after crossing US$39 trillion. The debt has also quadrupled in less than 20 years. It took the US until 1981 to reach its first US$1 trillion in federal debt.

“It is staggering how predictable the fiscal decline of a global power can become,” MacGuineas added.

Foreign investors are also showing signs of caution. International investors hold nearly one-third of US Treasury securities, but their demand has weakened over the past year. This has added to concerns about the US government’s ability to borrow at manageable costs.

The pressure has also appeared in the bond market. A US$25 billion auction of 30-year Treasury bonds recently recorded its highest yield since 2021. On Tuesday, yields on long-term US government bonds reached their highest level in almost two decades. Investors are demanding higher returns as the US continues to issue large amounts of debt. Bond prices and yields move in opposite directions, so higher yields mean lower bond prices.

US Treasury Secretary Scott Bessent responded on Wednesday by announcing plans to increase the size of government buybacks for 10- to 30-year Treasury securities. The Treasury will raise the amount to at least US$4 billion per operation. The move is aimed at putting downward pressure on long-term bond yields.

Higher long-term Treasury yields can affect borrowing costs across the US economy. Mortgage rates, car loans and commercial lending rates often move higher when Treasury yields rise. With the federal debt continuing to grow, Trump again called for lower interest rates on Wednesday.

Asked at the White House whether Americans should worry about volatility in the bond market, Trump said: “I don’t think so at all. I think we have a very powerful country, and we’re powering through these ridiculous interest rates – they’re ridiculous. Look, when our country is strong, interest rates should go down.”

The latest budget figures show the scale of the problem. The Treasury reported a US$432 billion federal deficit for July, the fourth-highest monthly deficit in US history. Tariff refunds pushed customs receipts into negative territory for the third consecutive month. Spending on Social Security and Medicare for older Americans also continued to increase.

The deficit in the first 10 months of fiscal 2026 has already surpassed the total deficit recorded during the entire 2025 fiscal year. Two months remain in the current fiscal year.

Trump has continued to support high levels of government spending during his two presidential terms. US public debt increased by US$7.8 trillion during his first term. More than half of that increase came during the final nine months, when the government was responding to the pandemic.

Since Trump returned to office in January 2025, the US debt has increased by another US$3.8 trillion. Across his two terms so far, the increase stands at US$11.6 trillion.

Debt also rose sharply during Biden’s presidency. Public debt increased by US$8.4 trillion during his term. Pandemic recovery programmes contributed to the rise, along with major spending on infrastructure, clean energy subsidies and other Democratic policy priorities.

The Committee for a Responsible Federal Budget estimates that decisions made under both Trump and Biden have pushed the federal debt higher than the level that would have resulted from existing spending laws when each president took office.

Trump’s major second-term legislation, the One Big Beautiful Bill Act, is expected to add another US$4.7 trillion to the federal debt, according to the US Congressional Budget Office.

Trump has presented his second presidency as an effort to reduce government costs. His administration ordered major federal job cuts through the Department of Government Efficiency. However, many of the spending reductions have focused on discretionary programmes, which make up the smallest part of federal spending.

The US government spends about US$7 trillion each year. Around 60 per cent goes toward mandatory programmes such as Social Security, Medicare, Medicaid and veterans’ care. These costs generally rise with living expenses and the needs of an ageing population.

Another US$1.1 trillion goes toward interest payments on government debt. This cost increases as the debt grows and interest rates remain high. In fiscal 2025, debt service costs exceeded Pentagon spending for the first time.

During the first 10 months of fiscal 2026, interest payments also surpassed Medicare spending, making debt interest the second-largest item in the federal budget after Social Security.

The growing cost of retirement and healthcare for the baby boomer generation is putting additional pressure on Social Security and Medicare trust funds. At the same time, payroll and income tax revenues remain insufficient to cover the government’s overall spending. With borrowing continuing to rise, the US faces growing pressure to address its long-term fiscal imbalance before debt costs place an even heavier burden on the economy.