For the first time in history, the total US government debt has surpassed $40 trillion. This figure was revealed in updated data from the US Treasury Department on Wednesday. Economists have long been concerned about the rapidly rising debt. They fear that a combination of excessive borrowing, increased government spending, and tax cuts could push the world’s largest economy toward a major financial crisis.
Despite advocating for spending cuts and efficiency—key themes of his second term—US debt continues to rise rapidly. Meanwhile, the private entity known as the Department of Government Efficiency has cut between 250,000 and 350,000 federal jobs since early last year and reduced global aid.
In May 2023, the Congressional Budget Office (CBO) projected that US debt would reach $40 trillion by 2028. However, the country crossed this threshold nearly two years ahead of that forecast.
Maya MacGuineas, president of the budget watchdog group Committee for a Responsible Federal Budget (CRFB), stated, “The $40 trillion debt isn’t just a figure on the government’s balance sheet; it is felt throughout the entire economy and, in one way or another, impacts people’s pockets.”
How fast is the debt growing?
US debt has grown much faster in the 2020s compared to previous decades. When Trump first assumed the presidency in January 2017, the total US debt stood at approximately $19.95 trillion. In other words, the debt has nearly doubled since then.
During Trump’s first term, government debt increased by about $7.8 trillion, a significant portion of which was driven by spending to combat the coronavirus pandemic.
Since returning to power for a second term in January 2025, the debt has risen by another $3.8 trillion. Across both terms, the debt increased by approximately $11.6 trillion under Trump’s leadership.
Meanwhile, massive borrowing and government spending continued during Joe Biden’s administration from 2021 to 2025. During that period, US debt increased by approximately $8.4 trillion. In March of this year, US debt surpassed $39 trillion. This means an additional $1 trillion was added in less than five months.
By comparison, it took nearly 200 years for the total US debt to cross the $1 trillion mark for the first time in 1981.
According to CBO projections, US debt could rise from approximately 101 percent of GDP in 2026 to 120 percent by 2036. The highest debt-to-GDP ratio recorded by the US after World War II was 106 percent.
Why US debt is ballooning—
Excessive spending to tackle crises
Over the past two decades, two major crises—the 2007–09 recession and the 2020–23 COVID-19 pandemic—forced the government to incur massive debt to increase spending. Pandemic-related expenditures account for nearly one-third of the growth in US debt since 2017.
Spending exceeds revenue
Spending that far outstrips tax and other government revenues is another key reason for the rise in debt. Costs associated with pensions and healthcare for the aging population, in particular, are on the rise.
Experts note that administrations from both the Democratic and Republican parties have failed to reduce this deficit by either controlling spending or increasing revenue.
The US spends approximately $7 trillion annually. About 60 percent of this goes toward Social Security, health insurance programs like Medicare and Medicaid, and medical and other services for military veterans.
This massive expenditure cannot be covered by revenue alone. For instance, in July of this year, the US collected $334 billion in revenue from various sources, including personal income tax, social insurance taxes, and corporate taxes. However, during the same period, the government spent $766 billion across various sectors—including Social Security, health insurance, national defense, and interest payments on debt—an amount nearly double the revenue collected.
Who holds the $40 trillion US debt?
A significant portion of the total $40 trillion US national debt is held by domestic and foreign investors. According to data from the US Department of the Treasury, approximately 80 percent of the total debt—or about $32 trillion—is held by the public. Of this total, approximately $21 trillion is owed to various domestic creditors. These include—
- Federal Reserve: $4.528 trillion
- Mutual funds: $5.195 trillion
- Pension funds: $1.135 trillion
- State and local governments: $1.636 trillion
- Commercial banks and depository institutions: $2.083 trillion
- Other corporate and individual lenders: $6.660 trillion
The United States also holds a massive amount of debt owed to various countries and foreign investors internationally. In 1970, foreign creditors held only 5 percent of the total U.S. debt; however, by 2025, that figure had risen to 32 percent.
This means that while the U.S. benefits from foreign investment, a significant portion of the country’s income flows abroad in the form of interest payments.
As of 2025, the largest foreign creditors of the United States include—
- Japan: $1.203 trillion
- United Kingdom: $889 billion
- China: $683 billion
Additionally, the United States holds debt owed to more than 30 other countries and foreign institutions.
On the other hand, approximately 20 percent of the total national debt—or nearly $8 trillion—is owed by various government agencies to one another. This is known as intergovernmental debt.
What is the impact of this rising debt on the U.S. economy?
According to analysts, failure to rein in debt could trigger a major economic crisis for the United States. This carries the risk of high inflation or rising interest rates.
Continued growth in debt levels could create economic uncertainty and dampen private investment, potentially slowing down economic growth.
