WASHINGTON, D.C. / RankWire.AI / – On August 18, U.S. Treasury data indicated that the country’s gross national debt reached $40.047 trillion, setting a new record for federal borrowing. By August 27, this figure increased further to approximately $40.078 trillion. Of this total, roughly $32.314 trillion was debt held by the public, with government accounts managing about $7.764 trillion.
This significant milestone was achieved less than five months after the debt surpassed $39 trillion in March. In August 2016, the gross national debt was close to $19.5 trillion, roughly half of today’s level. When federal expenditures outpace revenue, the government finances the shortfall primarily through issuing Treasury bills, notes, and bonds to investors and government accounts.
Persistent budget deficits continue to strain the nation’s finances. The Congressional Budget Office reported a deficit of $1.8 trillion for the first 10 months of fiscal 2026, exceeding the same period in fiscal 2025 by $169 billion. During this time, revenue grew by $139 billion, or 3%, while federal spending increased by $308 billion, or 5%. The agency forecasts the full-year deficit will reach around $2.1 trillion.
Interest payments on federal debt now surpass $1 trillion
Interest expenses are now a larger portion of the federal budget. For fiscal 2026, net interest costs are projected to exceed $1 trillion, up from about $970 billion in 2025. This amount constitutes roughly 3.3% of the U.S. gross domestic product. Current projections suggest that annual net interest payments could reach $2.1 trillion by 2036, representing about 4.6% of GDP at that time.
The share of debt held by the public relative to the economy has also increased. Experts estimate it will reach approximately 101% of GDP in 2026 and could rise to 120% by 2036. The previous peak was 106% in 1946 following World War II. Under these projections, publicly held debt may approach $56 trillion, with gross federal debt nearing $64 trillion by 2036.
Debt levels impact borrowing conditions and economic growth
The extent of federal borrowing influences financial conditions across the broader economy. The Congressional Budget Office has identified that increased government borrowing can push interest rates higher and dampen private sector investment over time. Reduced capital availability for businesses can hinder expansion and productivity improvements, potentially affecting worker wages and household income. Consumer borrowing rates, including those for mortgages and auto loans, are affected by overall interest-rate trends and other factors.
While gross national debt and the federal deficit are related, they measure different aspects of fiscal health. The debt reflects accumulated government obligations, whereas the deficit tracks annual gaps between spending and revenue. Both remain elevated in fiscal 2026, with gross debt surpassing $40 trillion and the estimated deficit at $2.1 trillion. This deficit accounts for about 5.8% of GDP, compared to a 50-year average of roughly 3.8%.