The US government debt has surpassed $40 trillion, crossing another major threshold as years of rising budget deficits continue to push the country’s borrowing higher.
According to the Treasury Department, total US debt stood at $40.05 trillion as of Tuesday, about four and a half years after it first exceeded $30 trillion.
The increase has been driven by years of escalating budget deficits, which were further boosted by stimulus spending during the Covid-19 pandemic. The public share of the debt is now close to 100%.
Deficit approaches $1.8 trillion
In its latest monthly accounting of US finances, the Treasury Department reported a $432.3 billion deficit in July, the highest monthly shortfall since March 2021.
The year-to-date deficit is approaching $1.8 trillion, exceeding the level recorded during the same period a year earlier.
A decade ago, total US government debt stood at $19.4 trillion, highlighting the scale of the increase over the past 10 years.
The growing debt burden has also had implications for financial markets.
Treasury responds to rising yields
Treasury yields have risen sharply since late June, reaching levels not seen since before the global financial crisis.
The recent increase in yields is believed to have contributed to the Treasury Department’s decision to announce an increase in the size of its repurchases involving longer-term debt.
During the global financial crisis, the Federal Reserve cut benchmark interest rates to near zero and launched an aggressive bond repurchasing programme in late 2008 to help suppress borrowing costs.
Interest costs add to fiscal pressure
Concerns over the US debt and deficit situation, together with increased corporate bond issuance linked to artificial intelligence investments, rising term premia and worries over the Federal Reserve’s commitment to fighting inflation, have supported higher yields.
With the Federal Reserve remaining hesitant to adjust interest rates without further information on inflation and the labour market, government borrowing costs have continued to climb.
Interest payments on the national debt have totalled nearly $1.2 trillion this year, making them the largest federal budget expenditure outside Social Security and Medicare.
