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Euronews1. Does the United States really have the largest debt in the world?
Yes, the scale of U.S. debt in absolute terms eclipses that of any other large economy in nominal terms.
However, it is not the country with the heaviest debt burden. The huge debt of the world’s largest economy looks less alarming when analyzed from the perspective of the strength of the economy backing it. This approach reflects the size of the burden relative to the country’s total economic output and is therefore considered a better indicator of its fiscal position than the gross debt figure alone.
The IMF projects that gross public sector debt for the United States as a whole will reach $40.7 trillion in 2026, against a nominal GDP of $32.4 trillion. This would place debt at 125.8% of GDP, above the 103.7% registered in 2012, highlighting that public debt has grown faster than the economy in this period. Figures come from the IMF’s World Economic Outlook database of April 2026.
2. How has U.S. debt reached $40 trillion?
Wars, recessions, and the COVID-19 pandemic have pushed up U.S. debt in recent years. However, the pace of increase has accelerated recently. The gross debt reached its previous milestone of $39 trillion in March 2026, less than five months ago.
"The gross national debt has doubled in the last ten years; in less than twenty years, it has quadrupled," MacGuineas explained, adding that the United States took nearly 200 years to see its gross debt reach $1 trillion for the first time, in 1981.
"At that time, President Reagan told the nation in a televised address: 'If our nation needs a warning, let it be this one.' Today, in the 250th year of U.S. history, we are spending more than that amount just on paying interest on our debt," he added.
3. What exactly does that $40 trillion include, and who is owed the money?
The figure of $40 trillion, known as gross federal debt, includes debt held by the public and intragovernmental debt held by the government itself. It does not include debts of state and local governments or individuals.
Debt held by the public is the portion owed to investors outside the federal government, including individuals, banks, pension and investment funds, foreign investors, state and local governments, and the Federal Reserve.
It is the largest component of the $40 trillion total and exceeds $32 trillion, according to the Committee for a Responsible Federal Budget.
MacGuineas stated in a release that, "debt held by the public has recently surpassed the size of our economy, the deficit relative to GDP is twice what it should be, and the cost of interest exceeds our national defense budget."
It may be somewhat reassuring that most of the U.S. Government’s debt is held domestically.
Among these investors are the Federal Reserve and accounts of the government itself, U.S. banks, pension and investment funds, insurers, state and local governments, households, and other investors.
Together, they owned about 76% of the federal debt by the end of June 2026, according to the Treasury.
Foreign and international investors constitute the next largest group, with $9.27 trillion, or 24.1%, in June 2026.
Japan held $1.12 trillion in Treasury securities in June 2026, representing 12% of foreign holdings. Countries outside the top twenty foreign holders together accounted for 19.9%.
4. Why is the Government still borrowing?
The Government borrows because it spends more than it takes in.
The federal budget deficit is projected to reach $1.9 trillion in 2026, equivalent to 5.8% of GDP. However, an August update shows the deficit had already reached $1.8 trillion in the first ten months of the 2026 fiscal year, which runs from October 1, 2025, to September 30, 2026.
The Congressional Budget Office (CBO) projects that federal outlays, including defense, Social Security, and net interest, will total about $7.4 trillion in fiscal year 2026, against revenues of about $5.6 trillion.
Total outlays include $1.67 trillion for Social Security, around $1.9 trillion for major health programs, $918 billion for defense, $1.04 trillion in net interest, and roughly $1.9 trillion for all other federal programs.
This latter category includes rental assistance, veteran programs, education, transportation, public safety, federal administration, and other federal activities.
5. How high can U.S. debt continue to rise?
The CBO warned in February 2026 that the United States’ fiscal trajectory is unsustainable, as persistent deficits raise debt and the cost of interest.
This implies that the Government will have to raise taxes, cut spending, or borrow even more to meet its obligations. According to its projections, gross federal debt will hover around $64 trillion by the end of 2036. Financing that debt is becoming increasingly costly.
This week, public debt, inflation concerns, and geopolitical risks have helped push long-term Treasury yields to multi-year highs. The 30-year yield touched about 5.34% on Tuesday, the highest since 2007, before retreating after the Treasury expanded its bond buyback programs.
A bond market rout has already made financing for businesses more expensive, and mortgages could follow suit if yields stay high.
In the long run, the high funding costs will inflate the future bill the U.S. federal government faces.
Official projections indicate that interest payments on the debt are becoming one of Washington’s largest spending items.
This rise in costs will coincide with relatively modest economic growth. The CBO projects real GDP growth to average 1.8% annually from 2027 to 2036, after a stronger pickup in 2026. The latest IMF forecast places U.S. growth at 2.3% in 2026.
Although investors do not currently expect the United States to default on its debt, the Treasury has expanded long-term bond buybacks in a high-yield environment. The move has drawn criticism from some market analysts.
JPMorgan strategists Jay Barry and Jason Hunter told MarketWatch this week that the measure only addresses symptoms and not the root cause of a roughly 6% of GDP deficit. They also questioned the long-term impact of these buybacks. They warned: "Without genuine fiscal consolidation, markets could conclude this action lacks credibility."
"The fact that the U.S. national debt has reached such elevated levels will focus attention on the deficit risks facing the world’s largest economy," said Coatsworth of AJ Bell.
The Committee for a Responsible Federal Budget has called for drastic measures, including a commitment to "no new debt" and a target of a 3% of GDP deficit, something they say already has bipartisan support.
MacGuineas added: "Whatever motivation our elected officials need to find to act, whether it’s voters’ concerns at home, market warning signals, foreign competition, or consequences of inaction, they should find it soon. No one knows how many more milestones the United States can endure."
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