U.S. government debt has hit $40 trillion\u2014an alarming milestone for economists who fear the nation\u2019s fiscal policy is spiraling out of control. <\/p>\n
It comes after the Congressional Budget Office (CBO) reported earlier this month that deficits are now so large that the U.S. Treasury is paying $3 billion a day in interest, totaling $963 billion between October 2025 (when the 2026 fiscal year begins) and July 2026.\u00a0<\/p>\n
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Treasury data for August 18 shows the closing balance for the day on public debt outstanding totaled $40.04 trillion.\u00a0<\/p>\n
Budget watchdogs have continually called on policymakers to get America\u2019s fiscal house in order. Proposals range from cutting annual federal deficits in half as a share of GDP, down from the current 6% to 3%, to calls to \u201ccut up the credit cards\u201d entirely. The White House itself has indicated it recognizes a problem, with President Trump suggesting tariffs or visa policy could help plug the budget gap: So far, data suggests it won\u2019t be enough.<\/p>\n
With the country\u2019s debt-to-GDP ratio now north of 120% (a metric lenders will watch when analyzing the risk premium on loans to the U.S.), debt hawks are warning the public is already paying, and is only going to start feeling the squeeze more acutely. <\/p>\n
Michael Peterson is the chairman and CEO of the Peterson Foundation, a nonpartisan organization dedicated to putting the U.S. on a more sustainable fiscal path. Speaking to Fortune<\/em> as America hit the $40 trillion benchmark, Peterson explained that even if families don\u2019t receive a \u201cbill in the mail\u201d for national debt, they\u2019re already paying. <\/p>\nHe explained: \u201cWhen the U.S. borrows this much\u2014and continues to borrow more and more\u2014that drives up interest rates, which then increases household expenses because your mortgage goes up, your car loan, your credit card bills, and inflation more generally. So [we] may not get a bill at the end of the month for national debt, but [we] are paying that bill both in the form of taxes as well as an inflated level of expenses.\u201d <\/p>\n
While the mechanics of how debt may trickle down to individual households\u2019 finances are complicated, voters are nevertheless expressing concern about the topic as D.C. heads into midterms. In July, a Peterson Foundation study reported 94% of voters are more likely to support a candidate with a plan to address the debt, including 95% of Democrats, 92% of independents, and 94% of Republicans.<\/p>\n
\u201cTo anyone who cares about America, about democracy and our future, in my view, this is already a crisis,\u201d Peterson said, \u201cbecause the level of fiscal mismanagement is tragic. It is burdening every household today, it\u2019s laying more and more debt on our children and grandchildren, and that\u2019s not how America got to be the great country that it is.\u201d <\/p>\n
What gives?<\/h2>\n
The bull case for debt is reasonable. Firstly, despite years of warnings, there has yet to be a market meltdown sparked by debt.<\/p>\n
Indeed, Treasury yields\u2014the surest sign of confidence in U.S. borrowing and lending\u2014are showing no signs of acute discomfort. At the time of writing, 30-year Treasuries sit above 5%, elevated (in part) by the uncertainty of Federal Reserve policy. 10-year treasuries are sitting above 4.6% for a similar confluence of reasons.<\/p>\n
But debt hawks point to other indicators that suggest the budget will have to give in one area or another. <\/p>\n
Nancy Vanden Houten, lead U.S. economist Oxford Economics, said in a recent note that \u201cmandatory spending, including Social Security, Medicare, and interest on the debt, continue to see the most growth in spending. Fiscal year-to-date defense spending continues to creep higher as the war with Iran drags on; as of July, defense spending was up 5% y\/y.\u201d<\/p>\n
A trade-off between two of those outlays seems to be on the books: The trust fund for social security is due to run dry in a little under eight years, and Medicare in a little under seven years, according to estimates by the Committee for a Responsible Federal Budget. <\/p>\n
While \u201cit\u2019s hard to pinpoint an exact moment in time or an exact program that will be in jeopardy, if you care about government programs and what the government can do to help society, defend our country, make sure the most vulnerable are protected, and take care of the elderly, the first thing you should do is put us on a more stable fiscal path so that all those programs are less in jeopardy,\u201d Peterson said. <\/p>\n
However, any cross-party agreement to examine or target borrowing in order to reduce debt is yet to materialize. Peterson adds: \u201cThere\u2019s a lack of urgency that concerns me. Just because the financial markets were OK yesterday doesn\u2019t mean they\u2019re gonna be OK tomorrow.\u00a0To just continue to cross your fingers and hope that we can get away with a completely irresponsible level of budgeting is not a reasonable way to lead our country.\u201d<\/p>\n<\/div>\n
#National #debt #crosses #trillion #level #fiscal #mismanagement #tragic<\/p>\n","protected":false},"excerpt":{"rendered":"
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