WASHINGTON, D.C. / RankWire.AI / – The gross national debt of the United States has exceeded $40 trillion for the first time, marking a new fiscal threshold. The U.S. Treasury’s Debt to the Penny data recorded $40.047 trillion on Aug. 18. By Aug. 27, the total had risen to approximately $40.078 trillion. Of this amount, about $32.314 trillion was held by outside investors and institutions, while the federal government held roughly $7.764 trillion.
This $40 trillion milestone was reached less than five months after the gross federal debt hit $39 trillion in March. A decade earlier, in August 2016, the total was close to $19.5 trillion. Federal debt increases when government expenditures outpace revenue, leading Washington to borrow to cover the deficit. The large deficits during the pandemic era, along with ongoing annual budget shortfalls after emergency programs concluded, contributed significantly. The government primarily finances these deficits through the sale of Treasury securities.
According to the Congressional Budget Office, the federal budget deficit totaled $1.8 trillion in the first 10 months of fiscal 2026. This was $169 billion more than the same period last year. Federal revenue increased by $139 billion, or 3%, while outlays rose by $308 billion, or 5%. The agency now projects a $2.1 trillion deficit for fiscal 2026, up from its earlier estimate of $1.9 trillion made in February.
Interest expenses climb as federal borrowing grows
Interest payments have become a significant component of federal spending as debt levels and borrowing costs have risen. Current forecasts estimate that net federal interest payments will exceed $1 trillion in fiscal 2026, compared with $970 billion in 2025. This amount represents roughly 3.3% of gross domestic product. Projections suggest that by 2036, net interest costs will reach $2.1 trillion, or 4.6% of GDP. At that level, interest payments will nearly match all projected discretionary federal spending.
The debt held by the public is also approaching historic high levels relative to the U.S. economy’s size. Forecasts indicate that it will be 101% of GDP in 2026 and 120% by 2036. The previous record was 106% in 1946, shortly after World War II. The baseline scenario predicts that publicly held debt will be close to $56 trillion by 2036, with gross federal debt approaching $64 trillion. The current statutory federal debt limit is set at $41.1 trillion.
Wider economic impacts from rising debt levels
Federal borrowing also influences broader economic conditions beyond the government’s finances. Budget analysts have identified that increased government borrowing competes with private sector borrowing for available savings and tends to drive up borrowing costs over time. This process can diminish private investment and slow economic growth relative to a lower-debt trajectory. Reduced investment also results in less productive capital for workers, affecting productivity and wages. These dynamics link federal debt levels to credit market conditions, business investment, and household income across the economy.
While gross national debt and the federal deficit are related, they measure different aspects of government finances. Gross debt includes all accumulated federal obligations, such as publicly held debt and securities owned by government accounts, whereas the deficit reflects the yearly difference between government spending and revenue. Both indicators remain high in 2026, with gross debt surpassing $40 trillion and the annual deficit estimated at $2.1 trillion. Federal deficits now amount to roughly 5.8% of GDP this year, compared to a 50-year average of 3.8%.