The United States government has crossed a significant financial milestone, with its debt exceeding $40 trillion for the first time, according to data released by the Treasury Department on Wednesday. This surge comes as interest rates continue to rise, a trend noted by AFP.
Following the latest bond issuance on Tuesday, the total Treasury debt now stands at $40.047 trillion. This increase is attributed to heightened borrowing related to health and social security, along with the interest being paid on the debt.
The growth of the federal debt has outpaced earlier projections, with the Congressional Budget Office (CBO) estimating that the federal debt would reach approximately $39.4 trillion by the end of the year.
This rapid escalation in U.S. debt occurs amid growing inflation concerns, particularly due to the ongoing conflict in the Middle East and rising energy prices, which have driven Washington’s borrowing costs to levels not seen in years.
US Faces Highest Interest Payments Since 2007
The yield required by investors for long-term (30-year) bonds issued by the U.S. Treasury reached its highest level since 2007 on Tuesday. This situation compels the U.S. government to spend more for refinancing, further exacerbating the public debt.
Interest rates saw a slight decline on Wednesday after U.S. Treasury Secretary Scott Bessent intervened in an effort to reassure investors.
“It is well known that the federal deficit is evolving at an unsustainable pace,” emphasized Jessica Riedl, a budget expert at the Brookings Institution.
The U.S. debt has doubled since the financial crisis of 2008 and now represents nearly 125% of the country’s Gross Domestic Product (GDP).
Deficit Growth During Trump’s Presidency
Riedl noted that in the past, deficits between 3% and 4% of GDP were concerning for financial markets, but these levels are now approaching 6% to 7% of GDP. “This has made the markets more nervous,” she stated.
President Donald Trump vowed during his two terms to reduce government spending and the annual deficit. Bessent indicated that his goal is to bring the U.S. deficit down to 3% of GDP.
However, the deficit has increased in recent months, particularly due to tax refund payments to businesses following a Supreme Court decision in February deeming many of them illegal. Tax cuts and military spending, particularly related to the conflict with Iran, have also consumed billions of dollars.
Analysts point out that there is no specific debt-to-GDP ratio that automatically triggers a crisis. Moreover, public debt, which excludes federal government claims against one another, is a more closely monitored indicator than total debt.
“But from a psychological perspective, these are the benchmarks that alert financial markets to the need to reassess the growing debt,” Riedl warned.
