Some offers on this page are from advertisers who pay us, which may affect which products we write about, but not our recommendations. See our Advertiser Disclosure. The U.S. government's debt clock is quickly ticking to $40 trillion.
It's a staggering, hard-to-process number, totaling over $359,000 in federal debt for every American taxpayer. Bank of America's chief equity strategist, Michael Hartnett, projects the number will swell to $50 trillion in less than three years. "The problem with $40 trillion is not the number," Stephen Innes, financial markets analyst and former investment bank trader, wrote in an analysis.
"Markets have been watching the US debt clock spin higher for years and, for most of that time, the response has been little more than a shrug. Washington spends, Treasury issues, investors absorb it, and the machine keeps moving." The largest federal budget items are Medicare/Medicaid combined (nearly $2 trillion), Social Security (over $1.6 trillion), national defense ($946 billion) — and interest on the debt (over $1 trillion). Innes believes interest costs will soon begin "eating the budget alive," with the steep trajectory of the government debt making the interest expense "one of Washington's largest single outlays." What does that mean for the stock and bond markets — and the cost of living?
Read more: Best high-yield savings account rates For fiscal year 2026, the federal government is projected to collect $5.6 trillion in revenue while spending about $7.4 trillion. That results in a deficit of roughly $1.9 trillion, according to the Congressional Budget Office. "In other words, the government is spending roughly $1.33 for every $1 collected," Colin Slabach, clinical assistant professor at New York University's School of Professional Studies, told Yahoo Finance in an email.
"The good news is that there is still plenty of demand for US government debt," he added. "The problem is that if that changes in the future — and nations like Japan need to sell our debt to stabilize their own currency — it could lead to an overabundance of supply." That's when the Treasury would have to pay increasingly higher interest rates to attract investments in the U.S. government, Slabach said. Read more: What soaring Treasury yields mean for your finances As swelling government debt pushes bond yields higher, borrowing costs for consumers also rise.
"As the federal government runs a deficit, it must borrow the difference by issuing Treasury securities. Treasuries pushes yields higher to attract investors. Those yields then serve as a benchmark for interest rates across the economy," the Peter G.
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