{"id":77375,"date":"2026-08-20T13:28:25","date_gmt":"2026-08-20T13:28:25","guid":{"rendered":"https:\/\/www.pantheregroup.com\/2026\/08\/20\/u-s-public-debt-hits-us40-trillion-raising-doom-loop-risk\/"},"modified":"2026-08-20T13:28:25","modified_gmt":"2026-08-20T13:28:25","slug":"u-s-public-debt-hits-us40-trillion-raising-doom-loop-risk","status":"publish","type":"post","link":"https:\/\/www.pantheregroup.com\/2026\/08\/20\/u-s-public-debt-hits-us40-trillion-raising-doom-loop-risk\/","title":{"rendered":"U.S. public debt hits US$40 trillion, raising \u2018doom loop\u2019 risk"},"content":{"rendered":"<div style=\"text-align:center\"><\/div><p> \n<br \/><iframe loading=\"lazy\" title=\"U.S. economy is losing momentum: Rosenberg\" width=\"1080\" height=\"608\" src=\"https:\/\/www.youtube.com\/embed\/wjJda5wywOI?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/p>\n<p> Total United States public debt surpassed US$40 trillion for the first time, and has now surged by a third in less than five years, as U.S. lawmakers continue to shrug off calls to contend with historically wide fiscal deficits. <\/p>\n<p> Public debt outstanding stood at US$40.05 trillion as of the close of business Tuesday, a Treasury Department release on Wednesday showed. <\/p>\n<p> The news came hours after Treasury Secretary Scott Bessent made a fresh attempt to rein-in long-term borrowing costs from multi-year highs \u2014 a notable component of the growth in debt. The Treasury said it\u2019s ramping up a buyback program for longer-dated securities, in an announcement that sent yields lower. <\/p>\n<p> The crossing of the US$30 trillion mark only dates back to January 2022, illustrating the rapid growth in federal borrowing needs. And there\u2019s no end in sight. <\/p>\n<p> Republicans have long opposed revenue-raising tax increases, while both parties have been loathe to sign on to politically toxic cuts to healthcare and retirement benefits for seniors. Many observers anticipate Congress and the administration of the day will only act if forced by a financial-market disruption. <\/p>\n<p> That\u2019s not for lack of talk about the issue in Washington. Bessent, for one, said a key reason he got involved in politics was to help tackle deficits running at a pace unprecedented for times outside of major wars, pandemics or depressed job markets. <\/p>\n<p> Yet economists, the Congressional Budget Office and Wall Street all see little or no progress in coming years for the deficit-to-gross domestic product ratio. <\/p>\n<p><img decoding=\"async\" src=\"data:image\/gif;base64,R0lGODlhAQABAIAAAAAAAP\/\/\/ywAAAAAAQABAAACAUwAOw==\" fifu-lazy=\"1\" fifu-data-sizes=\"auto\" fifu-data-srcset=\"https:\/\/i0.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2026\/08\/qw_US_Public_Debt_Hits_a_Fresh_Record_High__Interest_costs_2C_Soc.jpg?ssl=1&w=75&resize=75&ssl=1 75w, https:\/\/i0.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2026\/08\/qw_US_Public_Debt_Hits_a_Fresh_Record_High__Interest_costs_2C_Soc.jpg?ssl=1&w=100&resize=100&ssl=1 100w, https:\/\/i0.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2026\/08\/qw_US_Public_Debt_Hits_a_Fresh_Record_High__Interest_costs_2C_Soc.jpg?ssl=1&w=150&resize=150&ssl=1 150w, https:\/\/i0.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2026\/08\/qw_US_Public_Debt_Hits_a_Fresh_Record_High__Interest_costs_2C_Soc.jpg?ssl=1&w=240&resize=240&ssl=1 240w, https:\/\/i0.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2026\/08\/qw_US_Public_Debt_Hits_a_Fresh_Record_High__Interest_costs_2C_Soc.jpg?ssl=1&w=320&resize=320&ssl=1 320w, https:\/\/i0.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2026\/08\/qw_US_Public_Debt_Hits_a_Fresh_Record_High__Interest_costs_2C_Soc.jpg?ssl=1&w=500&resize=500&ssl=1 500w, https:\/\/i0.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2026\/08\/qw_US_Public_Debt_Hits_a_Fresh_Record_High__Interest_costs_2C_Soc.jpg?ssl=1&w=640&resize=640&ssl=1 640w, https:\/\/i0.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2026\/08\/qw_US_Public_Debt_Hits_a_Fresh_Record_High__Interest_costs_2C_Soc.jpg?ssl=1&w=800&resize=800&ssl=1 800w, https:\/\/i0.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2026\/08\/qw_US_Public_Debt_Hits_a_Fresh_Record_High__Interest_costs_2C_Soc.jpg?ssl=1&w=1024&resize=1024&ssl=1 1024w, https:\/\/i0.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2026\/08\/qw_US_Public_Debt_Hits_a_Fresh_Record_High__Interest_costs_2C_Soc.jpg?ssl=1&w=1280&resize=1280&ssl=1 1280w, https:\/\/i0.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2026\/08\/qw_US_Public_Debt_Hits_a_Fresh_Record_High__Interest_costs_2C_Soc.jpg?ssl=1&w=1600&resize=1600&ssl=1 1600w\" alt=\"\" data-has-syndication-rights=\"1\" data-license-id=\"\" data-portal-copyright=\"\" fifu-data-src=\"https:\/\/i0.wp.com\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2026\/08\/qw_US_Public_Debt_Hits_a_Fresh_Record_High__Interest_costs_2C_Soc.jpg?ssl=1\" title=\"\" \/><\/p>\n<p> \u201cOptically, I\u2019m sure crossing thresholds like US$40 trillion will focus attention on the issue in the near term,\u201d said Matthew Luzzetti, chief U.S. economist at Deutsche Bank AG. \u201cBut it does not represent a magical threshold for debt dynamics, and projections have anticipated this outcome for some time.\u201d <\/p>\n<p> More important, Luzzetti said, is the climb in U.S. Treasury yields , which is steadily increasing the cost of servicing the record debt load. Last Thursday, the department\u2019s latest 30-year bond auction resulted in the costliest such sale in a quarter century. A 10-year auction a day earlier drew the highest financing cost at that tenor since 2007. <\/p>\n<p> As buyers demand higher yields, that in turn drives up the Treasury\u2019s borrowing needs. With two months left to go in the fiscal year, the government\u2019s tally for interest costs so far for 2026 is US$1.17 trillion \u2014 a 15 per cent increase on the same period a year before. That in turn adds to the debt, potentially fuelling further investor calls for higher rates, in a pattern known as a \u201cdoom loop.\u201d <\/p>\n<p> Interest costs are now the third-largest part of the budget, after healthcare and Social Security. <\/p>\n<p> The public debt figure includes both the marketable Treasuries that investors focus on and \u201cintragovernmental\u201d debt \u2014 which reflects items such as past surpluses in the Social Security system that were parked into specially issued Treasuries. <\/p>\n<p> \u201cThe federal budget is the enemy within,\u201d Douglas Holtz-Eakin, president of the American Action Forum and a former director of the CBO, wrote in a note Monday. \u201cIt is the greatest threat to the foundations of economic progress, U.S. international economic standing, and national security. The only reason for optimism should be material actions to rein in the sea of red ink. There are no such material actions.\u201d <\/p>\n<p> The rise in U.S. debt accelerated during the punishing economic downturns tied to the global financial crisis and the COVID pandemic. During those periods, revenue slid as tax-paying workers lost jobs, and assistance payments jumped. <\/p>\n<p> Analysis compiled by Deutsche Bank economists shows policy measures by administrations over time also contributed notably: <\/p>\n<ul>\n<li>George W. Bush administration tax cuts in the early 2000s are estimated to have reduced revenues by US$3.3 trillion through the-mid 2010s.<\/li>\n<li>President Donald Trump\u2019s tax cuts passed in 2017 reduced revenues by at least another US$1.5 trillion over the first decade.<\/li>\n<li>On the spending side, the wars in Iraq and Afghanistan cost taxpayers over US$1.6 trillion through the mid-2010s.<\/li>\n<li>The debt impact of President Barack Obama\u2019s passage of the Affordable Care Act \u201cis more uncertain, with some official estimates showing a reduction in deficits but others arguing that it added ~US$500 billion to U.S. debt over the first decade.<\/li>\n<li>President Joe Biden\u2019s 2021 American Rescue Plan Act was estimated to increase deficits by US$1.8-to-1.9 trillion over a decade, excluding interest costs.<\/li>\n<\/ul>\n<p> Bessent came into office in 2025 touting a budget deficit target of around three per cent of GDP by the end of President Donald Trump\u2019s second term, which concludes in January 2029. <\/p>\n<p> It\u2019s not clear how that may yet happen. The ratio was six per cent in July, according to data compiled by Bloomberg. <\/p>\n<p> Trump, seeking to galvanize support ahead of the November midterm elections, is eyeing new tax-cut promises in addition to increases in defence spending. Meanwhile, the Elon Musk-led 2025 Department of Government Efficiency effort, which sought to slash discretionary spending including on contracts and government buildings, failed to cut outlays as much as DOGE\u2019s own estimates projected. <\/p>\n<p> The government is now getting ever closer to the statutory debt ceiling of US$41.1 trillion. Hitting that marker is expected to trigger another in the series of partisan showdowns in Washington over the years to head off a potentially devastating U.S. payments default. <\/p>\n<p> The ceiling will be reached in mid-2027, Fitch Ratings estimates. The agency on Aug. 13 affirmed the country\u2019s AA+ credit rating, while adding to warnings about the current borrowing trajectory. <\/p>\n<p> \u201cThe government has not taken meaningful actions to address the large general government fiscal deficits,\u201d Fitch said. \u201cSpending pressures will mount over the next decade due to an aging population.\u201d <\/p>\n<ul class=\"related_links\">\n<li>Bessent becomes most interventionist U.S. Treasury chief in decades<\/li>\n<li>Bessent boosts debt buybacks after climb in Treasury yields<\/li>\n<\/ul>\n<p> The country will be \u201cvulnerable to future economic shocks\u201d as debt levels increase, the rating company said. <\/p>\n<p> \u201cHitting this big round number will hopefully send a wake up call throughout Washington,\u201d said Michael Peterson, who chairs the Peter G. Peterson Foundation, a research group, in regard to the US$40 trillion. \u201cIt will hurt everyday affordability across the country if we don\u2019t get our debt under control,\u201d he said. <\/p>\n<p> Continued outsize borrowing \u201cwill put upward pressure on interest costs, which will make everyone\u2019s mortgage car loans and credit card bills even higher.\u201d <\/p>\n<p> <em>\u2014With assistance from Laura Curtis.<\/em> <\/p>\n<p> Bloomberg.com <\/p>\n<p><iframe loading=\"lazy\" title=\"Trump says oil companies made &amp;apos;too much money&amp;apos;\" width=\"1080\" height=\"608\" src=\"https:\/\/www.youtube.com\/embed\/qYekf5fTTvM?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><br \/>\n<br \/>\n<br \/>U.S. public debt hits US$40 trillion, raising \u2018doom loop\u2019 risk<\/a><br \/>\n<br \/>2026-08-20 13:28:25<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Total United States public debt surpassed US$40 trillion for the first time, and has now surged by a third in less than five years, as U.S. lawmakers continue to shrug&#8230;<\/p>\n","protected":false},"author":2,"featured_media":77376,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2026\/08\/0821-mg-treasury-dept.jpg","fifu_image_alt":"","footnotes":""},"categories":[31],"tags":[],"class_list":["post-77375","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy"],"_links":{"self":[{"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/posts\/77375","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/comments?post=77375"}],"version-history":[{"count":0,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/posts\/77375\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/media\/77376"}],"wp:attachment":[{"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/media?parent=77375"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/categories?post=77375"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/tags?post=77375"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}