The US gross national debt crossed $40 trillion on August 18, and the federal government is now on pace to spend more than $1 trillion a year just on interest. That interest bill already rivals defense spending and trails only Social Security and Medicare among federal budget line items.
The US gross national debt crossed $40 trillion on August 18, reaching $40.047 trillion according to Treasury Department daily statements. The speed of the climb stands out more than the total: the debt passed $39 trillion just five months earlier in March 2026, and cleared $38 trillion in October 2025.
Interest costs rival defense spending
In the first ten months of fiscal year 2026, the federal government spent $931 billion on interest payments alone — money that funds none of the government's programs, only the cost of past borrowing. Annual net interest costs are now projected to exceed $1 trillion for the full fiscal year, a figure that rivals US defense spending and is closing in on Medicare outlays. Interest has become one of the three largest items in the federal budget, trailing only Social Security and Medicare.
Higher Treasury yields mean every new bond the government issues carries a steeper rate. That pressure ripples outward, raising borrowing costs for mortgages, car loans, and corporate debt beyond Washington's own balance sheet.
How the debt got here
The national debt has more than doubled since January 2017. An estimated one-third of the recent growth traces back to COVID-era borrowing under both the Trump and Biden administrations.
But that was a one-time shock layered on structural forces already straining the budget: aging-driven growth in Social Security and Medicare spending, tax reforms that cut revenue without matching spending cuts, and defense funding that stayed elevated amid global instability. The result is persistent annual deficits exceeding $2 trillion.
Of the $40 trillion total, about $32.27 trillion is held by the public — investors, foreign governments, and institutions that buy Treasury securities — a figure approaching US GDP levels. The remainder sits in intragovernmental holdings, IOUs between different parts of the federal government.
What it means for markets
Rising government borrowing costs tend to pull up interest rates across the economy, a pressure that can weigh on equity valuations, especially for growth stocks whose future earnings are worth less as discount rates climb in the bond market. Existing bond portfolios lose value as rates rise, even as new bonds offer more attractive yields. Corporate borrowers face steeper refinancing costs too, which can compress margins and slow hiring.
For digital asset markets, the more immediate risk is regulatory. Governments under fiscal pressure have historically sought new revenue sources, and a Treasury Department under budget strain has incentive to tighten reporting rules and close perceived loopholes in digital asset taxation.
Source: Crypto Briefing
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