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Debt milestone and pressure
The United States national debt surpassed $40 trillion for the first time, with ABC News saying the gross national debt has topped $40 trillion this week for the first time and that it has doubled in size in less than a decade.
“Federal debt tops $40 trillion. Here's what it means for your wallet”
ABC News reported that ballooning federal debt puts upward pressure on interest rates for consumer loans, which could make it more expensive to take out a mortgage or pay off a credit card.
AP News said the national debt surpassed a record $40 trillion on Wednesday and that the milestone came just five months after the U.S. hit a record $39 trillion debt in March.
AP News also linked the debt milestone to federal spending priorities, writing that defense costs, social programs like Social Security and Medicare, and interest on the burgeoning deficit make up an enormous share of federal spending.
ABC News quoted Shai Akabas saying, “This is something that impacts Americans right now,” as it described how the debt affects everyday pocketbooks.
Officials, economists, and debate
ABC News described a split among economists and fiscal analysts, quoting Charley Ballard of Michigan State University saying, “There’s no need to panic at this point,” while also noting the federal debt is “one of the things putting upward pressure on interest rates.”
In the same ABC News report, Kent Smetters of the University of Pennsylvania’s Wharton School said, “There’s no question that higher debt leads to higher interest rates,” and added that a change in fiscal policy could ease the pressure over time.
AP News quoted Kush Desai, a White House spokesman, saying the Trump administration “has been focused on slashing waste, fraud, and abuse in federal spending while accelerating economic growth to get America’s debt-to-GDP ratio trending in the right direction.”
AP News also included a warning from Margaret Spellings, president and CEO of the Bipartisan Policy Center, saying, “Our current fiscal trajectory is plainly unsustainable, and that’s the best-case scenario.”
What happens next
AP News said the U.S. is subject to a statutory debt limit and that the Bipartisan Policy Center estimates the U.S. will most likely reach the $41.1 trillion debt limit sometime between late winter and mid-summer of 2027.
“reach the $41.1 trillion debt limit sometime between late winter and mid-summer of 2027”
ABC News reported that interest rates on long-term government debt help set borrowing costs for mortgages, auto loans, and credit cards, and that if they rise, consumers face higher loan expenses and greater risk of default.
CBS News added that the Treasury Department’s daily financial report showed the nation’s debt reached $40.05 trillion on August 18 and that interest payments are consuming a larger share of the nation’s spending.
CBS News quoted Michael Peterson of the Peter G. Peterson Foundation saying, “We’ve been running deficits for the last 26 years,” and warned that the longer the structural challenges are ignored, the worse the debt problem gets.
Boursorama said interest payments have become one of the largest line items in the federal budget and that persistent deficits imply the country continues to accumulate debt as its interest bill grows, citing analyst Ipek Ozkardeskaya.