💬 Discussion

America’s national debt continues to climb

Friday, Aug 21

KS

Kendra Secrett

Image: Farm Credit Illinois

America’s national debt surpassed $40 trillion for the first time this week, marking another milestone in Uncle Sam’s decades-long borrowing spree.

  • Treasury Dept. data shows the national debt has risen from $39 trillion in March and $38 trillion last October.
  • It’s also more than doubled from a decade ago, when America’s national debt stood at $19.4 trillion.

How did we get here?

The federal government has spent more than it collects in taxes each year since the Clinton administration, with Uncle Sam borrowing to cover the difference by selling Treasury bonds to investors, who expect to be paid back with interest.

Analysts point to several factors that kicked borrowing into a higher gear in recent years:

  • The government borrowed heavily under both President Trump and former President Biden to stabilize the economy during Covid and support its recovery.
  • Costs for Social Security, Medicare, and defense have continued rising, while tax cuts have reduced government revenue.
  • More recently, Trump’s 2025 tax-and-spending law is projected to add trillions to deficits over the next decade, while the Iran war and $160+ billion in tariff refunds have added to this year’s tab.

Here’s the interest-ing part: Investors are currently demanding higher yields to hold longer-term US debt, partly due to concerns over rising deficits. The 30-year Treasury yield topped 5.3% this week, its highest level since 2007.

  • That means higher borrowing costs for the US government, as existing debt comes due and new debt is issued at today’s higher rates.
  • Interest payments on America’s national debt have reached nearly $1.2 trillion this fiscal year, making them the government’s largest expense outside Social Security and Medicare.

The Treasury Department tried to ease interest-rate pressure Wednesday by announcing plans to buy back more long-term government bonds from investors. Bond yields initially fell, but bounced back on Thursday.

How high is the alarm level?

Fiscal watchdogs say the trend is becoming increasingly dangerous, as interest eats up more of the federal budget following a decade-plus stretch of lower rates that ended post-Covid.

  • But the Trump admin argues some policies adding to today’s deficits will generate future economic growth and tax revenue.
  • Treasury Secretary Scott Bessent has compared the near-term cost of last year’s business tax cuts to “pulling back a slingshot,” arguing they’ll spur investment that pays off down the road.

Looking ahead… The US is fast approaching its $41.1 trillion borrowing limit, after which the Treasury Dept. can’t issue any more new debt. Once that is reached, Congress would need to raise or suspend the limit or the US could eventually fail to pay its bills in full and on time, following temporary “extraordinary measures.”

📊 Flash poll: In your opinion, how should the US government deal with its rising national debt and associated interest payments?

See a 360° view of what pundits are saying →

Democratic donkey symbol

Sprinkles from the Left

  • Some commentators argue that Republicans are making America’s already serious debt problem worse by cutting taxes while continuing to spend heavily, adding trillions to projected deficits while producing relatively little in meaningful spending cuts. They also note that as borrowing costs continue to climb, Congress should stop kicking the can down the road and make tough budget choices for a more sustainable fiscal future.
  • Others contend that America’s growing national debt is closely tied to decades of tax cuts that disproportionately benefit the wealthy. They also say too much taxpayer money is going towards paying interest on the debt, instead of funding priorities like schools, healthcare and infrastructure.
Republican elephant symbol

Sprinkles from the Right

  • Some commentators argue that America’s national debt shows Washington has lost control of federal spending, with large deficits continuing even without a pandemic or high unemployment. They also say rising interest payments eat up money that could go toward priorities like defense, education and Social Security and make the country’s finances increasingly difficult to sustain.
  • Others contend that Washington’s inability to rein in spending is becoming increasingly difficult to ignore, as the government routinely spends more than it collects and devotes a growing share of the budget to interest payments. They note that this can drive up borrowing costs for everyday Americans and leave lawmakers with even tougher decisions about taxes and spending as Social Security and Medicare face growing financial pressure.
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