U.S. National Debt Nears $40 Trillion as Interest Costs Threaten to Reshape Federal Spending

U.S. National Debt Nears $40 Trillion as Interest Costs Threaten to Reshape Federal Spending

America’s national debt is approaching $40 trillion as rising interest costs, healthcare spending and persistent deficits put growing pressure on the U.S. federal budget.

America’s national debt is moving toward an extraordinary milestone, approaching $40 trillion as the federal government continues to spend more money than it collects in revenue.

The scale of the borrowing is difficult to comprehend. According to the U.S. Congressional Joint Economic Committee, total gross national debt stood at approximately $39.38 trillion on July 3, 2026, up about $3.16 trillion from a year earlier. The committee said the debt was increasing at an average rate of roughly $8.66 billion per day during the preceding year.

The debt figure has become an increasingly important economic and political issue because borrowing does not simply create a larger balance on the government’s books. As debt accumulates, the government must also make interest payments to holders of Treasury securities.

That means a growing share of federal resources can be consumed by the cost of servicing past borrowing rather than funding current priorities.

The issue is particularly significant because the Congressional Budget Office, or CBO, expects federal deficits to remain large over the coming decade. Its February 2026 baseline projects that the federal budget deficit will rise from $1.9 trillion in fiscal year 2026 to $3.1 trillion in 2036.

Why America’s National Debt Is Approaching $40 Trillion

The national debt represents the accumulated borrowing of the federal government over time.

When Washington spends more than it collects in taxes and other revenues, it runs a budget deficit. The government generally finances that shortfall by borrowing through Treasury securities.

The U.S. Treasury describes national debt as the amount the federal government has borrowed to cover the outstanding balance of expenses incurred over time.

The debt therefore reflects decades of federal budget deficits rather than a single administration or a single spending program.

Economic downturns, wars, emergency spending, tax policies, entitlement programs, healthcare costs and other government priorities have all contributed to changes in federal borrowing.

The current challenge is that the gap between federal spending and revenues remains substantial even outside major economic emergencies.

According to CBO projections, federal revenues are expected to total approximately $5.6 trillion in 2026, compared with federal outlays of about $7.4 trillion. That produces a projected deficit of around $1.9 trillion.

In other words, the government is expected to borrow heavily simply to cover the difference between what it spends and what it collects.

Interest Payments Are Becoming a Major Budget Pressure

One of the biggest concerns surrounding America’s debt is the cost of interest.

When the government borrows money, Treasury securities must be serviced. As the total debt grows, and as older low-interest securities are replaced by new debt issued at higher rates, interest costs can increase significantly.

CBO projects that net federal interest outlays will exceed $1 trillion in 2026, rising from approximately $970 billion in 2025. The agency expects net interest costs to reach roughly $2.1 trillion by 2036.

That creates a powerful fiscal challenge.

Money spent servicing debt cannot simultaneously be used for another federal purpose. Every additional dollar devoted to interest is a dollar that policymakers cannot directly allocate to infrastructure, scientific research, education, public services or other priorities.

The issue becomes more serious when interest rates remain elevated.

Higher rates mean the government can pay more to borrow new money and refinance maturing debt. If borrowing remains high at the same time, the two forces can reinforce each other.

More debt can mean more interest expense, while higher interest rates can make the existing debt burden more expensive to maintain.

Debt Is Rising Faster Than the Economy

The size of national debt is important, but economists also examine debt relative to the size of the economy.

That is because a $40 trillion debt burden means something different for a small economy than it does for an economy producing tens of trillions of dollars in annual output.

CBO projects that federal debt held by the public will rise from about 101% of GDP in 2026 to 120% of GDP in 2036 under current law. That would put the debt-to-GDP ratio well above its previous post-World War II record of approximately 106% of GDP.

The distinction between gross national debt and debt held by the public is important.

Gross debt includes debt held by the public as well as certain debt held by federal government accounts. Debt held by the public focuses on debt owed to outside investors, including individuals, financial institutions, businesses, foreign investors and other entities.

Both measures are useful, but they answer different questions about the federal government's financial position.

Aging Population Adds to the Pressure

America’s demographic changes are another major factor behind the long-term budget challenge.

The U.S. population is aging, increasing the number of people who qualify for programs such as Social Security and Medicare.

CBO has warned that population aging and rising healthcare costs will place increasing pressure on federal spending. In its latest projections, spending on Social Security, Medicare and Medicaid accounts for a major portion of the growth in non-interest federal spending over the next decade.

Medicare is especially important.

CBO projects Medicare outlays of approximately $1.1 trillion in 2026, with spending expected to reach about $2 trillion in 2036. The agency attributes the increase to growing enrollment and higher spending per beneficiary.

This creates a difficult policy problem.

Reducing federal spending is politically challenging when the programs involved provide retirement income or healthcare for millions of Americans.

At the same time, leaving the underlying trends unchanged could result in significantly higher spending over the long term.

Why $40 Trillion Matters

The $40 trillion milestone is psychologically powerful, but the round number itself is not the main economic concern.

What matters more is the trajectory of debt, the cost of borrowing and whether economic growth is strong enough to keep the debt burden manageable.

A country can carry a large amount of debt if its economy grows rapidly and investors remain confident in its ability to repay.

However, persistent deficits can become increasingly difficult to manage when interest costs grow faster than revenues.

CBO projects that federal deficits will remain historically large over the coming decade. The agency estimates that deficits will rise from 5.8% of GDP in 2026 to 6.7% in 2036.

That means the government could continue adding significantly to the national debt even as the economy expands.

What Could Happen If Interest Costs Continue Rising?

Growing interest costs could gradually reduce the federal government's flexibility.

The effect may not appear as a single dramatic event. Instead, it could develop through a slow shift in the federal budget.

As interest payments consume more resources, policymakers may have fewer options to increase spending elsewhere without raising taxes, cutting other programs or borrowing even more.

CBO projects net interest outlays to increase from roughly 3.3% of GDP in 2026 to 4.6% in 2036. By 2036, interest costs are projected to nearly equal all federal discretionary spending.

This is why the national debt debate extends beyond accounting.

It is ultimately about how much room the federal government has to respond to future economic crises, national emergencies and emerging priorities.

If another major recession, financial crisis or national emergency occurs, policymakers may want to deploy substantial fiscal resources. A high debt burden could make that response more complicated.

Could the Debt Affect Infrastructure, Education and Research?

A growing debt burden does not automatically mean that funding for infrastructure, education or scientific research will be cut.

However, rising interest costs can make those decisions more difficult.

The federal budget has competing demands. Programs such as Social Security and Medicare serve millions of Americans, defense spending addresses national security priorities, and other discretionary programs support infrastructure, transportation, education, research and public services.

When interest payments rise, they become another major claim on federal resources.

CBO estimates that net interest costs will increase by more than $1 trillion between 2026 and 2036.

That additional cost could create pressure for policymakers to make difficult decisions about taxation and spending.

Is America Facing an Immediate Debt Crisis?

Approaching $40 trillion in debt does not mean the United States is automatically facing an immediate financial collapse.

The United States has several unique advantages, including the size of its economy, the depth of its financial markets and the global role of the U.S. dollar.

Treasury securities are also widely used by investors and institutions as financial assets.

Nevertheless, the long-term fiscal trend is a serious concern.

The U.S. Treasury maintains official data on federal debt, including daily information on total outstanding debt.

Meanwhile, CBO's projections show that debt held by the public is expected to continue rising as a share of the economy under current law.

The key question is therefore not whether America can suddenly pay off $40 trillion.

It is whether the government can slow the rate at which debt grows relative to the economy while maintaining essential services and supporting economic growth.

What Can Policymakers Do?

There is no single solution to America’s debt problem.

Policymakers could consider a combination of spending reforms, changes to tax policy, economic growth measures and reforms to major entitlement programs.

Some proposals focus on reducing government spending. Others emphasize raising additional revenue. Some policymakers argue that faster economic growth can improve the government's fiscal position by increasing tax revenues without equivalent increases in tax rates.

However, each option involves trade-offs.

Spending cuts can affect government services or benefits. Tax increases can affect households and businesses. Changes to Social Security or Medicare can affect retirees and future beneficiaries.

The longer policymakers wait, the more difficult the choices could become because debt and interest costs continue accumulating.

The Road Ahead for America’s Debt

The approaching $40 trillion national debt milestone is a reminder of a much larger issue facing the United States.

The immediate headline number is enormous, but the more important story is the combination of persistent budget deficits, rising interest costs, demographic changes and healthcare spending.

CBO's current projections show that federal debt held by the public could reach 120% of GDP by 2036, while net interest costs could rise to approximately $2.1 trillion annually.

Those numbers illustrate why America's fiscal outlook has become a central economic and political issue.

The challenge is not simply paying today's bills.

It is ensuring that future generations inherit a government with enough financial flexibility to invest, respond to emergencies and provide essential services without allowing interest costs to dominate the federal budget.

As America moves closer to the $40 trillion debt milestone, the debate over spending, taxation, economic growth and fiscal responsibility is likely to become even more intense.

The national debt will continue to change every day. The larger question is whether Washington can change the trajectory behind that number.

FAQ

What is the U.S. national debt?

The U.S. national debt is the accumulated amount the federal government owes as a result of borrowing to finance deficits and other federal obligations. The Treasury provides official data tracking the government's outstanding debt.

How close is the U.S. national debt to $40 trillion?

The Congressional Joint Economic Committee reported total gross national debt of approximately $39.38 trillion on July 3, 2026. That puts the debt within striking distance of the $40 trillion milestone.

How much will U.S. debt grow by 2036?

CBO projects that debt held by the public will rise to approximately 120% of GDP by 2036. It also projects that the federal government will borrow an additional $26 trillion between the end of 2025 and the end of 2036 under its baseline assumptions.

Why are interest payments on U.S. debt increasing?

Interest costs are rising because the federal government has accumulated more debt and because new borrowing can carry higher interest rates than some older debt. CBO projects net interest outlays to rise from about $1 trillion in 2026 to $2.1 trillion in 2036.

Does the national debt affect ordinary Americans?

The debt can affect Americans indirectly through government budget decisions, interest costs, taxes, public services, economic growth and future fiscal policy. The effects depend on how policymakers respond to the long-term debt trajectory.

Can the United States reduce its national debt?

Yes, but reducing or stabilizing debt requires sustained changes to the relationship between government revenues, spending, economic growth and interest costs. The precise policy combination remains a major subject of political and economic debate.

Bottom Line

America's national debt is approaching a historic $40 trillion milestone, but the bigger concern is what happens next. With persistent deficits, rising interest expenses and growing costs associated with an aging population and healthcare, the fiscal challenge could become increasingly difficult.

CBO's projections provide a clear warning about the direction of travel: without significant changes to the underlying budget outlook, debt held by the public is expected to rise substantially over the next decade.

The debate over America's debt is therefore no longer simply about a large number on a government balance sheet. It is about the choices policymakers make today—and the economic opportunities and financial obligations those choices leave for the next generation.

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