US national debt passes $40 trillion as interest costs set a record

The US national debt has surpassed $40 trillion for the first time². Fortune noted the milestone in the context of the Treasury’s bond plan, saying the debt had just hit that level¹. Interest payments for the fiscal year could exceed $1 trillion². By another account, with more than $40 trillion outstanding, annual interest payments have already exceeded $1 trillion¹⁰.

Interest payments on the national debt reached a record high of $1,267,362,000,000 for August⁴. That increases pressure on the federal budget as older low-rate debt rolls into current market rates^4,5. Interest on the national debt now runs at more than $3 billion a day, and interest payments have nearly tripled since 2020⁶. The record figure was measured on interest payments on public debt through August⁵.

The ratio and the deficit

The US debt-to-GDP ratio has returned to 100 per cent for the first time in 80 years⁷. The historical peak was 106 per cent at the end of the Second World War in 1946, and the Congressional Budget Office expects the ratio to keep climbing⁷. The CBO also expects a federal budget deficit of $2.1 trillion, close to 6 per cent of GDP³.

Goldman Sachs has argued that a growing share of government spending now reflects higher interest payments to investors rather than new spending flowing into the broader economy⁹. RealClearMarkets framed the position as the product of an earlier Treasury decision, calling it a multi-trillion dollar mistake⁶.

What to watch

Issuance is shifting to the front end. Wall Street expects short-term US Treasury issuance to reach $1 trillion, and one analysis cautioned that large-scale issuance of short-dated debt could itself strain demand⁸. Fortune reported that the Treasury Secretary’s bond plan had already shown markets what will make the department flinch¹.

The debt limit is the near-term political constraint. The Bipartisan Policy Center estimates Washington will run into its debt limit between late winter and mid-summer, so Congress must act inside that window¹². MarketWatch reported that midterm voters are overwhelmingly worried about the national debt but that only small fixes are expected this year, with any package likely to raise the debt limit again while adding provisions to encourage budget watchdogs¹¹. It described the moment as possibly a last chance for dealmaking¹¹.