WASHINGTON, D.C. / RankWire.AI / – The total gross national debt of the United States has exceeded $40 trillion for the first time, marking a significant milestone in the country’s fiscal history. According to U.S. Treasury’s Debt to the Penny data, the debt reached $40.047 trillion on August 18. By August 27, the figure had increased to approximately $40.078 trillion. Of this amount, about $32.314 trillion was held by outside investors and institutions, while federal government accounts held roughly $7.764 trillion.
The $40 trillion threshold was crossed less than five months after the gross federal debt hit $39 trillion in March. A decade prior, in August 2016, the total was close to $19.5 trillion. Federal debt rises when government expenditure outpaces revenue, leading Washington to borrow funds to cover the shortfall. Pandemic-related spending resulted in unusually large deficits, and budget shortfalls persisted even after emergency programs concluded. The government largely finances these deficits by issuing Treasury securities.
During the first 10 months of fiscal 2026, the Congressional Budget Office reported the federal budget deficit at $1.8 trillion. This is $169 billion higher than the same period last year. Revenues increased by $139 billion, or 3%, while outlays went up by $308 billion, or 5%. The CBO now projects a $2.1 trillion deficit for fiscal 2026, revised upward from its February estimate of $1.9 trillion.
Interest expenses grow as government borrows more
Interest payments are now a major component of federal expenditures, driven by rising debt levels and borrowing costs. Current forecasts indicate net federal interest spending will surpass $1 trillion in fiscal 2026, up from $970 billion in 2025. This amount represents about 3.3% of gross domestic product. Under current projections, net interest costs could reach $2.1 trillion by 2036, accounting for approximately 4.6% of GDP. At this level, interest expenses would nearly match all projected discretionary federal spending.
The debt held by the public is also near historic highs when compared to the size of the U.S. economy. Estimates suggest it will be 101% of GDP in 2026 and could rise to 120% by 2036. The previous record was 106% in 1946, shortly after World War II. The baseline forecast predicts that publicly held debt will be close to $56 trillion by 2036, with gross federal debt near $64 trillion. The current statutory debt limit stands at $41.1 trillion.
Growing federal debt influences broader economic conditions
Government borrowing impacts not only the federal budget but also the wider economy. Budget analysts have found that increased government borrowing competes with private sector savings and raises borrowing costs over time. This process tends to diminish private investment and slow down economic growth compared to a lower-debt trajectory. Reduced investment results in less productive capital for workers, which can negatively affect productivity and wages. These dynamics link federal debt levels to credit availability, business investment, and household income across the economy.
While gross national debt and the federal deficit are related, they measure different aspects of government finances. Gross debt includes accumulated federal obligations, such as publicly held debt and securities held by government accounts. The deficit reflects the annual difference between government spending and revenue. Both indicators remain high in 2026, with gross debt exceeding $40 trillion and the annual deficit estimated at $2.1 trillion. Federal deficits account for roughly 5.8% of GDP this year, compared to a 50-year average of 3.8%.