Federal debt tops $40 trillion, adding the last trillion in under five months

Gross federal debt exceeded $40 trillion for the first time, reaching $40.047 trillion in the Treasury's Tuesday balance — less than five months after the total passed $39 trillion. Debt held by the public, the portion sold into bond markets to investors, foreign central banks and the Federal Reserve, stood at about $32.3 trillion. The remaining roughly $7.7 trillion is intragovernmental debt: IOUs between federal accounts, mostly what the Treasury owes the Social Security trust fund. The two figures behave differently. Public debt is the part that competes with private borrowers for savings and pushes on interest rates; the Committee for a Responsible Federal Budget calls the gross number "less economically meaningful" as a share of GDP. "It took nearly 200 years for America's gross debt to reach $1 trillion for the first time in 1981," the group noted.

What the interest bill on that debt is crowding out:

• Net interest hit $971 billion in fiscal 2025 — more than defense, more than Medicare, second only to Social Security.
• Interest eats 19 cents of every federal revenue dollar in 2026, up from 9 cents in 2021; CBO projects 26 cents by 2036.
• CBO's February 2026 baseline projects net interest reaching $2.1 trillion by 2036 — roughly double projected defense spending that year.
• Deficits are set to average 6.1% of GDP over the next decade against a 50-year average of 3.8%.