WASHINGTON, D.C. / RankWire.AI / – The total gross national debt of the United States has exceeded the $40 trillion mark for the first time, marking a significant fiscal milestone. According to U.S. Treasury’s Debt to the Penny data, the debt reached $40.047 trillion on Aug. 18, and by Aug. 27, it had grown to approximately $40.078 trillion. Of this amount, about $32.314 trillion was held by external investors and institutions, while the federal government accounts held roughly $7.764 trillion.
This $40 trillion figure was achieved less than five months after the debt hit $39 trillion in March. A decade ago, in August 2016, the total was nearly $19.5 trillion. The federal debt increases when government expenditures outpace revenue, prompting borrowing to cover the shortfall. Pandemic-related spending caused unprecedented deficits, and even after emergency programs concluded, annual budget gaps persisted. Treasury securities are the primary means for the government to fund these deficits.
During the first 10 months of fiscal 2026, the Congressional Budget Office reported a federal budget deficit of $1.8 trillion. This figure is $169 billion higher than the same period last year. Federal revenues grew by $139 billion, or 3%, while outlays increased by $308 billion, or 5%. The CBO now projects a $2.1 trillion deficit for fiscal 2026, up from their February estimate of $1.9 trillion.
Rising interest costs driven by increased borrowing
As debt levels and financing costs rise, interest payments have become a significant component of federal expenditure. Current forecasts suggest that net federal interest spending will exceed $1 trillion in fiscal 2026, compared to $970 billion in 2025. This represents roughly 3.3% of GDP. By 2036, estimates indicate net interest payments will reach $2.1 trillion, or 4.6% of GDP. At this level, interest costs nearly match all projected discretionary federal spending.
Publicly held debt also remains near historic highs relative to the U.S. economy, projected at 101% of GDP in 2026 and rising to 120% by 2036. The previous peak was 106% in 1946, shortly after World War II. The projections estimate publicly held debt will approach $56 trillion by 2036, with gross federal debt nearing $64 trillion. Currently, the statutory debt limit is set at $41.1 trillion.
Federal borrowing impacts broader economic conditions
Government borrowing influences credit markets beyond federal finances. Analysts note that increased borrowing competes with private sector savings, raising borrowing costs over time. This trend can reduce private investment, slow economic growth, and leave workers with less productive capital, negatively affecting productivity and wages. Consequently, federal debt levels are linked to credit availability, business investment, and household income across the economy.
Gross national debt and the federal deficit represent different facets of government finances. The gross debt includes all federal obligations, such as publicly held securities and those held by government accounts. The deficit reflects the yearly difference between government spending and revenue. Both remain high in 2026, with gross debt surpassing $40 trillion and the annual deficit estimated at $2.1 trillion. Federal deficits this year account for about 5.8% of GDP, compared to a 50-year average of 3.8%.