US national debt has passed a record US$40 trillion (£29.4 trillion). This milestone is a major warning sign. It reveals vulnerabilities that threaten the long-term economic stability of the US and the rest of the world.
The speed of US debt accumulation is staggering. US national debt first reached $1 trillion in 1941 and, after rising to $20 trillion in 2017, has more than doubled over the past nine years. It is expected to increase by $2.1 trillion in the 2026 fiscal year alone.
The primary source of high US national debt is Washington’s inability to control its persistent budget deficit. This stems in part from systemic political incentives. Addressing a deficit requires either cutting public spending, raising taxes or both.
These are actions that tend to be punished by voters. Various structural factors also drive high US national debt. Mandatory spending on programmes such as social security and health insurance schemes like Medicare and Medicaid consume almost two-thirds of the federal budget.
This spending is set to increase due to demographic ageing – the median age of Americans increased from 35.6 in 2001 to 39.4 in 2025. The cost of servicing national debt has itself also become a major driver of US federal budget deficits. Annual net interest payments the US government pays on its outstanding loans currently stand at around $1.2 trillion, eclipsing national defence spending.
Servicing debt is now the second-largest item in the US federal budget, behind only social security, and is expected to cost more than $16.2 trillion over the next decade. A key reason why this status quo persists is the global importance of the US dollar. The US dollar has long served as the world’s primary reserve currency, and is the most widely used currency for international trade.
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