US national debt tops $40 trillion for first time, sparking fiscal crisis fears

The total U.S. debt has climbed above $40 trillion for the first time, the Treasury Department announced Wednesday. This unprecedented figure has prompted urgent warnings from fiscal watchdog groups about an impending crisis, as the costs of social safety-net programs and interest on the national debt are rapidly exceeding government revenues, which have been constrained by tax cuts.

The Treasury's latest data reveals the total public debt outstanding reached $40.047 trillion on Tuesday. This includes $32.266 trillion in Treasury securities held by the public and $7.782 trillion in intra-governmental debt holdings. The national debt has more than doubled in less than a decade, soaring from $19.95 trillion when President Donald Trump took office in January 2017.

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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.

Approximately one-third of this dramatic increase occurred during the COVID-19 pandemic, fueled by extensive government borrowing under both the Trump and Biden administrations. The remaining growth is attributed to the combined fiscal policies of both presidents, alongside long-standing imbalances between taxation and spending.

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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.

Budget analysts have been anticipating this $40 trillion threshold for weeks, issuing stark warnings that a full-blown debt crisis could erupt if lawmakers do not address the unsustainable fiscal trajectory. They advocate for measures such as raising taxes, cutting spending, or a combination of both. Maya MacGuineas, president of the Committee for a Responsible Federal Budget, emphasized that the debt's impact extends beyond government ledgers, affecting the economy and individuals' finances. She noted the debt has quadrupled in less than 20 years, reaching $1 trillion for the first time in 1981.

Concerns are mounting as global U.S. creditors may be growing wary. Demand from foreign investors, who hold nearly a third of U.S. Treasuries, has declined over the past year. Yields on long-term Treasury bonds have recently hit their highest levels in nearly two decades, indicating investors are demanding greater compensation for holding U.S. debt amid substantial issuance. In response, Treasury Secretary Scott Bessent announced a doubling of buyback sizes for 10- to 30-year Treasuries to at least $4 billion per operation, aiming to reduce long bond yields.

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It is staggering how predictable the fiscal decline of a global power can become.