WASHINGTON, D.C. / RankWire.AI / – The United States has crossed the $40 trillion threshold in its gross national debt for the first time, marking a significant fiscal milestone. According to U.S. Treasury’s Debt to the Penny data, the figure was $40.047 trillion on August 18. By August 27, the total had increased to approximately $40.078 trillion. Of this total, about $32.314 trillion was held by external investors and institutions, while roughly $7.764 trillion was owned by federal government accounts.
Reaching the $40 trillion mark occurred less than five months after the gross federal debt hit $39 trillion in March. A decade prior, in August 2016, the debt was close to $19.5 trillion. The growth in federal debt results from government spending exceeding revenue, leading Washington to borrow to cover the shortfall. The pandemic-era expenditures created unusually large deficits, and annual budget shortfalls persisted even after emergency programs concluded. The government primarily finances these deficits through issuing Treasury securities.
According to the Congressional Budget Office, the federal budget deficit reached $1.8 trillion during the first 10 months of fiscal 2026. This represents an increase of $169 billion compared to the same period last year. Revenues rose by $139 billion, or 3%, while expenditures grew by $308 billion, or 5%. The CBO now projects a $2.1 trillion deficit for fiscal 2026, up from its earlier estimate of $1.9 trillion made in February.
Interest expenses grow alongside federal borrowing
As debt levels and borrowing costs increase, interest payments have become a significant component of federal spending. Current estimates suggest that net federal interest payments will surpass $1 trillion in fiscal 2026, compared to $970 billion in 2025. This amount accounts for about 3.3% of gross domestic product. Projections for 2036 indicate net interest costs reaching $2.1 trillion, or 4.6% of GDP. At this level, interest payments nearly match all projected discretionary federal spending.
Debt held by the public remains near historic highs relative to the size of the U.S. economy. Forecasts place this debt at 101% of GDP in 2026 and 120% by 2036. The previous peak was 106% in 1946, shortly after World War II. The baseline scenario estimates publicly held debt will be close to $56 trillion by 2036, with gross federal debt near $64 trillion. The current statutory debt limit is set at $41.1 trillion.
Broader economic impacts of rising debt
Federal borrowing influences financial conditions beyond government finances. Budget analysts have observed that increased government borrowing competes with private sector savings, elevating borrowing costs over time. This process suppresses private investment and can slow economic growth compared to a lower-debt trajectory. Reduced investment hampers productive capital formation, which affects productivity and workers’ earnings. Consequently, higher debt levels can impact credit availability, business investment, and household income across the economy.
While gross national debt and the federal deficit measure different aspects of government finances, both remain high in 2026. The gross debt exceeds $40 trillion, and the annual deficit is projected at $2.1 trillion. Federal deficits constitute roughly 5.8% of GDP this year, notably above the 50-year average of 3.8%.