WASHINGTON, D.C. / RankWire.AI / – The total U.S. gross national debt has exceeded $40 trillion, reaching a new record for federal borrowing. According to U.S. Treasury, the debt hit $40.047 trillion on Aug. 18, and by Aug. 27, it had increased to approximately $40.078 trillion. Of this, roughly $32.314 trillion is debt held by the public, with the remaining $7.764 trillion managed by government accounts.
This milestone came less than five months after the federal debt surpassed $39 trillion in March. Back in August 2016, the gross national debt was close to $19.5 trillion, which is about half of today’s figure. The federal government’s borrowing occurs when spending exceeds revenue, primarily financed through the issuance of Treasury bills, notes, and bonds to investors and government entities.
Persistent large annual budget gaps continue to pressure U.S. finances. The Congressional Budget Office recently reported a $1.8 trillion deficit for the first 10 months of fiscal 2026, which is $169 billion more than in the same period of fiscal 2025. While revenue increased by $139 billion, or 3%, federal expenditures rose by $308 billion, or 5%. The agency projects the total deficit for the year will reach around $2.1 trillion.
Federal interest payments top $1 trillion
Interest costs are now taking up a larger proportion of the federal budget. Net interest payments are expected to surpass $1 trillion in fiscal 2026, rising from about $970 billion in 2025. This amount represents roughly 3.3% of the U.S. gross domestic product. Projections indicate that annual net interest expenses could reach $2.1 trillion by 2036, which would be about 4.6% of GDP.
Debt held by the public has also increased relative to the size of the economy. Estimates show that this measure will stand at approximately 101% of GDP in 2026, and is expected to grow to 120% by 2036. The previous peak was 106% in 1946, following World War II. Under the same assumptions, publicly held debt could approach $56 trillion by 2036, with gross federal debt nearing $64 trillion.
Debt levels influence borrowing costs and economic growth
Substantial federal borrowing also impacts overall financial conditions within the economy. The Congressional Budget Office has found that increased government borrowing can lead to higher interest rates and a reduction in private investment over time. This reduction limits businesses’ capacity for expansion and productivity improvements, which can also affect worker wages and household incomes. Factors such as mortgage rates, auto loans, and other consumer credit are influenced by broader interest rate trends.
While gross national debt and the federal deficit both reflect different aspects of the government’s fiscal health, they remain elevated in fiscal 2026. The gross debt has gone above $40 trillion, and the projected annual deficit stands at $2.1 trillion. That deficit makes up about 5.8% of GDP, significantly higher than the 50-year average of roughly 3.8%.