WASHINGTON, D.C. / RankWire.AI / – For the first time, the U.S. gross national debt has exceeded $40 trillion, marking a new fiscal record. The U.S. Treasury’s Debt to the Penny data showed $40.047 trillion on Aug. 18. By Aug. 27, the total was approximately $40.078 trillion. Outside investors and institutions held about $32.314 trillion of that debt. The federal government accounts held roughly $7.764 trillion.
The $40 trillion threshold was crossed less than five months after the gross federal debt hit $39 trillion in March. A decade earlier, in August 2016, it was near $19.5 trillion. Federal debt increases when government spending outpaces revenue, and borrowing fills the gap. Pandemic-related spending caused unusually high deficits. Even after emergency programs ended, annual budget shortfalls persisted. Treasury securities are the main tool used to finance these deficits.
During the first 10 months of fiscal 2026, the Congressional Budget Office reported a federal budget deficit of $1.8 trillion. This was $169 billion more than the same period last year. Federal revenues grew by $139 billion, or 3%, while spending increased by $308 billion, or 5%. The agency now projects a $2.1 trillion deficit for fiscal 2026, up from its February estimate of $1.9 trillion.
Interest payments grow with increasing borrowing
Interest costs have become a significant part of federal expenditure. As debt levels and borrowing expenses rise, so do interest payments. Current estimates forecast net federal interest spending will surpass $1 trillion in fiscal 2026. This compares to $970 billion in 2025. It accounts for about 3.3% of gross domestic product. By 2036, net interest costs could reach $2.1 trillion, or 4.6% of GDP. At this point, interest costs nearly match all projected discretionary federal spending.
Public-held debt is also nearing historic levels relative to the U.S. economy. Estimates put that debt at 101% of GDP in 2026 and 120% by 2036. The previous record was 106% in 1946, shortly after World War II. By 2036, publicly held debt is projected to be about $56 trillion, with gross federal debt near $64 trillion. The current statutory debt limit is set at $41.1 trillion.
Wider economic impact of rising debt
Federal borrowing influences more than just government finances. Budget analysts have found that increased borrowing competes with private sector savings. This competition raises borrowing costs over time. Higher costs can reduce private investment and slow economic growth. Less investment means workers have less productive capital. This affects productivity and wages. These dynamics link federal debt levels with credit conditions, business investment, and household income across the economy.
Gross national debt and the federal deficit are different measures. Gross debt includes all federal obligations, such as publicly held debt and securities owned by government accounts. The deficit shows the yearly gap between spending and revenue. Both remain high in 2026. Gross debt exceeds $40 trillion, and the annual deficit is estimated at $2.1 trillion. Federal deficits make up about 5.8% of GDP this year, compared to the 50-year average of 3.8%.