The total US debt has surpassed $40 trillion for the first time, according to the Treasury Department. This milestone marks a significant increase in the nation’s debt, which has more than doubled in less than a decade.
The Treasury’s latest daily cash and debt balances statement showed total public debt outstanding at $40.047 trillion, including $32.266 trillion in Treasury securities held by the public and $7.782 trillion in intra-governmental debt holdings.
Debt Growth Under Trump and Biden
The federal government’s debt has grown substantially under the presidencies of Donald Trump and Joe Biden. During Trump’s two terms, the debt increased by $11.6 trillion, while it grew by $8.4 trillion during Biden’s term.
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According to the Committee for a Responsible Federal Budget, the policy choices of both presidents have contributed to the debt’s growth, with tax cuts constraining revenues and social safety net costs increasing.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, stated that the $40 trillion debt figure “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.”
Impact on the Economy
The growing debt has raised concerns about its impact on the economy, with some warning that it could lead to a fiscal crisis. The Committee for a Responsible Federal Budget has estimated that the debt’s growth will continue to exacerbate inflation, squeeze out other priorities in the budget, and leave the country vulnerable to emergencies.
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Global US creditors may already be growing wary, with demand from foreign investors holding nearly one-third of Treasuries declining over the past year. Yields on long-term Treasury bonds have also increased, with investors demanding greater compensation in the face of hefty US government bond issuance.
US Treasury Secretary Scott Bessent has taken steps to push long bond yields back down, announcing a doubling of buyback sizes for 10- to 30-year Treasuries to at least $4 billion per operation.
Pandemic Spending and Fiscal Policy
The COVID-19 pandemic has played a significant role in the debt’s growth, with both Trump and Biden implementing heavy spending measures to respond to the crisis. The Treasury reported a $432 billion deficit for July, the fourth-highest monthly deficit in US history.
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The US is spending more to fund the retirement and healthcare costs of the “baby boom” generation, straining the trust funds behind Social Security and Medicare even as payroll and income tax revenues fall short of covering federal costs. This demographic shift will likely continue to put pressure on the federal budget, making it essential for policymakers to develop strategies to address the growing debt burden and ensure the long-term sustainability of these critical programs.
They must consider the impact of their decisions on the economy and the citizens.
The nation’s debt is a pressing issue that requires immediate attention and action.