WASHINGTON, D.C. / RankWire.AI / – The U.S. national debt has now exceeded $40 trillion, reaching a new record for federal borrowing. According to U.S. Treasury data, the total hit $40.047 trillion on Aug. 18, and by Aug. 27, it had increased further to approximately $40.078 trillion. Of this total, roughly $32.314 trillion is debt held by the public, with about $7.764 trillion in government accounts.
This milestone came less than five months after the federal debt crossed the $39 trillion mark in March. In August 2016, the gross national debt was near $19.5 trillion, roughly half the current level. The growth in debt occurs when federal expenditures surpass income, and the government finances these annual deficits mainly through issuing Treasury bills, notes, and bonds to investors and government accounts.
The nation’s fiscal situation remains strained by sizable yearly budget deficits. The Congressional Budget Office reported a deficit of $1.8 trillion for the first 10 months of fiscal 2026, which is $169 billion more than the same period in fiscal 2025. While revenue increased by $139 billion, or 3%, federal outlays grew by $308 billion, or 5%. The CBO predicts that the full-year deficit will reach approximately $2.1 trillion.
Interest payments on federal debt surpass $1 trillion
Interest costs now constitute a larger portion of the federal budget. Net interest expenses are expected to go beyond $1 trillion in fiscal 2026, rising from about $970 billion in 2025. This amount represents roughly 3.3% of the U.S. gross domestic product. Projections show that annual net interest costs could reach $2.1 trillion by 2036, which would be about 4.6% of GDP at that time.
The proportion of debt held by the public relative to the economy has also increased. Forecasts estimate that this measure will be around 101% of GDP in 2026 and could grow to 120% by 2036. The previous peak was 106% in 1946, following World War II. Under current assumptions, publicly held debt could approach $56 trillion by 2036, while gross federal debt might near $64 trillion.
Debt levels influence borrowing and economic growth
Substantial federal borrowing impacts overall financial conditions within the economy. The Congressional Budget Office has indicated that higher government borrowing can push interest rates upward and limit private investment over time. Consequently, businesses may have less capital to expand and improve productivity, which can also affect worker wages and household incomes. Changes in mortgage rates, auto loans, and other consumer credit are influenced by broader interest rate trends.
While gross national debt and the federal deficit are related, they measure different aspects of the government’s financial health. The debt reflects accumulated obligations, whereas the deficit tracks the annual gap between spending and revenue. Both remain elevated in fiscal 2026. The gross debt has surpassed $40 trillion, and the estimated annual deficit stands at $2.1 trillion, which is about 5.8% of GDP compared to a 50-year average of approximately 3.8%.