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Debt hits $40T
The U.S. national debt surpassed $40 trillion on Wednesday, reaching $40.05 trillion on August 18, according to Treasury Department data cited by CBS News.
“the nation's debt reached $40.05 trillion on August 18”
AP News said the milestone figure was recorded just five months after the U.S. hit a record $39 trillion debt in March, and it highlighted that defense costs, Social Security and Medicare, and interest on the deficit make up an enormous share of federal spending.
AP News also reported that the Trump administration’s priorities include “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,” quoting White House spokesman Kush Desai.
CBS News added that interest payments are consuming a larger share of spending and said the U.S. government now spends more on servicing its debt than on national defense or Medicare.
CBS News quoted Michael Peterson, CEO of the Peter G. Peterson Foundation, saying, “We've been running deficits for the last 26 years, and we've basically ignored a lot of the structural challenges that exist in our budget.”
Buybacks to steady yields
In response to unsettled markets, the U.S. Treasury announced measures to support long-term bonds by doubling the volume of buybacks of government debt securities with maturities from 10 to 30 years, after the 30-year Treasury yield hit its highest level in 19 years.
Boursorama, citing Reuters information, said the Treasury’s buybacks would rise by at least $14 billion in the current quarter and that the increase would apply from September 9 to November 4, according to the department in a press release.
Boursorama also reported that the 30-year Treasury yield reached 5.34% before retreating, and it said the Treasury announcement led to a drop to 5.184% at the close.
AP News framed the debt milestone as already affecting Americans’ pocketbooks by raising borrowing costs for mortgages and cars, lowering wages from businesses with less money to invest, and creating more expensive goods and services.
Boursorama quoted Dan Gottlander of Citi saying, “This obviously does not change deficits, and if you want to buy back long-term securities, you will still need to issue new securities.”
What’s at stake next
CBS News said the public holds about 80% of the nation’s debt, with more than two-thirds held by domestic lenders such as mutual funds and the Federal Reserve System, while foreign investors hold the rest.
“If the Treasury rate is going up, that means your mortgage rate is going up”
CBS News also warned that taxpayers could bear the brunt as the government issues more Treasury securities to fund spending and must offer higher yields, quoting Peterson: “If the Treasury rate is going up, that means your mortgage rate is going up, your car loan is going up, your credit card rates are going up.”
AP News quoted Margaret Spellings, president and CEO of the Bipartisan Policy Center, saying, “The federal debt is already raising the cost of living and choking out other spending and investment, threatening our economy and Americans’ long-term prosperity,” in a statement.
AP News further reported that 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.
AP News concluded that the debt limit would require Congress to again vote on whether to raise or suspend it, as analysts warned the latest record milestone underscores mounting borrowing and interest costs.