US National Debt Nears $40 Trillion Amid Rising Interest Costs

The United States' gross national debt has surpassed $40 trillion, a significant milestone reached in August, following previous marks of $38 trillion in October and $39 trillion in March. This indicates an accumulation of approximately one trillion dollars every five months. Concurrently, the national deficit reached $2 trillion with a month remaining in the fiscal year. This escalating debt comes as the nation faces rising interest rates, with the 10-year Treasury yield hitting 5.04% last week, its highest point since 2007, and the Federal Reserve implementing rate hikes. While oil prices and inflation contributed to these immediate market movements, persistent government debt is identified by analysts as a key driver for climbing yields.

The fiscal situation has led to a downgrade in the United States' credit rating. In 2025, Moody's followed S&P, which downgraded the rating in 2011, and Fitch, which did so in 2023, in stripping the US of its AAA rating. This mirrors a sentiment expressed in Ernest Hemingway's "The Sun Also Rises," where a character describes going bankrupt "gradually and then suddenly." The current economic trajectory suggests the nation is deep into the "gradual" phase of this financial decline.

The implications of this debt extend beyond mere figures, directly impacting the United States' reserve currency status. This status is fundamental to the world lending money to the US at low rates, enabling the nation to sustain deficits that would be unmanageable for other countries, and empowering American sanctions. The privilege of this status is contingent on global confidence in America's ability to meet its financial obligations. This confidence, once lost, can disappear rapidly, akin to the sudden bankruptcy described in literature.

The compounding effects of the debt are already evident in the budget. For fiscal year 2025, net interest payments are projected to reach $970 billion. This figure represents an increase of approximately $150 billion more than the amount spent on national defense. Furthermore, interest payments rose by an additional $111 billion, or 12%, this year. Consequently, the US now allocates more funds to servicing its debt than to its military budget. Interest payments are identified as the fastest-growing major program within the federal budget, with projections indicating a more than doubling to $2.1 trillion by 2036. This situation is likened to managing an adjustable-rate loan the size of the entire economy, with the recent market adjustments signifying a significant rate increase.