- A new Treasury Department report shows U.S. debt surpassed the $40 trillion mark Tuesday.
- The national debt has quadrupled in less than 20 years and grew by $1 trillion since March.
- Economic impacts of rising debt are already showing up in the economy.
U.S. gross national debt officially surpassed the $40 trillion mark on Tuesday, according to a Treasury Department report released Wednesday.
The Treasury’s most recent daily cash and debt statement showed total outstanding U.S. public debt at $40.047 trillion on Tuesday, a total that includes Treasury securities held by the public of $32.266 trillion and intra-governmental debt holdings of $7.782 trillion, according to a report from Reuters.
“Forty trillion dollars of debt doesn’t exist solely on the government’s ledgers; it is felt throughout the economy and finds its way to the pocketbooks of people one way or another,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, in a statement released Wednesday. “The more we borrow, the more we exacerbate inflation, squeeze out other priorities in the budget, and leave ourselves vulnerable to emergencies at home and turmoil abroad.”
This year, planned government expenditures will outstrip revenues by $2 trillion, according to a February report from the Congressional Budget Office.
President Donald Trump’s administration blamed current debt levels on his Democratic predecessor Wednesday.
“President Trump pledged to clean up Joe Biden’s fiscal mismanagement,” White House spokesman Kush Desai said in a statement. “That’s why the Trump administration has been focused on slashing waste, fraud, and abuse in federal spending while accelerating economic growth to get America’s debt-to-GDP ratio trending in the right direction again.”
For the past 25 years, the national debt has grown under both parties, according to a Washington Post report, through the tax cuts of the George W. Bush era, the wars in Iraq and Afghanistan, the Great Recession, the 2017 Trump tax cuts and the nearly $2 trillion Biden administration initiative to prop up the economy during the coronavirus pandemic.
MacGuineas notes the country’s gross national debt has doubled in the past 10 years and is quadruple what it was less than 20 years ago. And it only took five months for the figure to grow to $40 trillion from the $39 trillion reached this March.
How the national debt impacts the economy
This week, the broader economic impacts of rising national debt surfaced in the bond market as investor pessimism about the direction of the U.S. economy helped drive bond yields to their highest levels in almost two decades.
Bond pricing and yields typically move in opposite directions and, generally speaking, positive investor sentiment about the direction of the economy sends bond prices higher and yields lower while investor pessimism can drive bond prices down and yields higher. More simply put, Treasury bonds are less attractive as an investment vehicle when the prospects of the economy look dim.
On Tuesday, the yield on the 30-year note rose briefly to 5.3%, the highest level since 2007. And 10-year bond yields, which act as an interest rate benchmark for U.S. home mortgages and other long-term debt, were hovering around 4.71% on Tuesday, also near multi-decade highs.
On Wednesday, Utah Republican Sen. John Curtis told the Deseret News that while last year’s federal budget process was noteworthy for being the first time since he joined the upper chamber that every appropriations bill, with the exception of ICE and DHS, was passed and done so “in a way that reduced the amount of spending”, this year’s budget journey has been somewhat more rocky.
“We’re not off to a good start,” Curtis said. “We’re kind of back in that same push-it-off mode a little bit. And so we’ve done a (continuing resolution) to push it off until Dec. 11. But I do think that we saw how to do it last year, and if we could keep doing that, we would end in a good place.”
Curtis said the deficit is always on his mind and he has taken on the role of a budget hawk when it comes to assessing and advancing the federal government’s annual fiscal plan.
“I’m always the voice in the room asking, ‘How are we going to pay for that?’” Curtis said. “The $1.5 trillion (defense budget for 2027) is a good example. And we’ll keep insisting that we just have to figure out how we’re going to pay for things.”
With the Federal Reserve hesitant to move on rates absent more information on inflation and the labor market, according to a report from CNBC, the government has seen its borrowing costs soar. Interest on the debt has totaled nearly $1.2 trillion this year and is the largest budget expenditure outside of Social Security and Medicare.
Contributing: Suzanne Bates