US debt exceeds $40 trillion for the first time - First warnings that a new fiscal crisis is beginning
Total U.S. debt has surpassed $40 trillion for the first time, the Treasury Department said, prompting fresh warnings that a fiscal crisis is brewing as rising costs for social safety net programs and interest payments far outweigh revenue foregone by tax cuts.
The Treasury's latest daily statement of cash and debt balances showed that total public debt outstanding was $40.047 trillion, a total that includes Treasury securities held by the public of $32.266 trillion and debt holdings within the government of $7.782 trillion.
Michael Peterson, chairman and executive director of the Peter G. Peterson Foundation, attributed the rising debt in part to an aging population, rising health care costs and tax policies that do not generate enough revenue to meet federal spending commitments.
Debt service costs exceeded Pentagon spending for the first time in fiscal year 2025. In the first 10 months of fiscal year 2026, interest costs exceeded Medicare spending, becoming the second largest item in the federal budget after Social Security.
Peterson said the government will need to refinance about $13 trillion in Treasury bonds over the next year, including about $2 trillion in new borrowing to finance the deficit. He said the heavy government borrowing contributed to higher mortgage, auto and credit card rates.
He said lawmakers could reduce the deficit gradually through a combination of changes in taxes and spending without immediately balancing the federal budget.
Peterson said more than 200 potential policy changes had been proposed by groups of experts from across the political spectrum. "It's just a matter of political courage and the political will to get things started," he stressed.
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