US debt hits $40 trillion: Who does Washington owe and why does it matter?

The total debt of the United States has surpassed $40 trillion for the first time in history, according to a Department of the Treasury update on Wednesday. Ballooning debt, especially during President Donald Trump’s second term, which began in January last year, has been raising concerns about a looming fiscal crisis for some time, with economists fearing a toxic combination of heavy borrowing, increased spending and lower taxes could land the world’s biggest economy in crisis. Fast-rising US debt comes despite Trump’s championing of cost-cutting and efficiency as a hallmark of his second term, with the nongovernmental Department of Government Efficiency (DOGE) slashing between 250,000 and 350,000 federal jobs and cutting global aid since the start of last year.

In May 2023, the Congressional Budget Office (CBO) predicted that the US would reach the $40 trillion mark in 2028. Maya MacGuineas, president of the Committee for a Responsible Federal Budget (CRFB), a budget watchdog, said in a statement, “$40 trillion of debt doesn’t exist solely on the government’s ledgers; it is felt throughout the economy and finds its way to the pocketbooks of people one way or another.” Here’s what we know about why US debt is rising, and why it matters: US debt is growing much faster in the 2020s than it did in previous decades. Total debt, which includes debt owed to others and what the government owes itself, has doubled since January 2017, when Trump began his first term as president.

US debt at the time was $19.95 trillion. During Trump’s first term, public debt rose by $7.8 trillion, most of it because of the cost of the COVID-19 pandemic response. Since his return to office in January 2025, debt has grown by $3.8 trillion, amounting to a total of $11.6 trillion across his two terms so far.

Under the Biden administration from 2021 to 2025, the government continued to borrow and spend heavily in response to the pandemic; debt rose by $8.4 trillion. US debt hit $39 trillion in March this year, meaning it took fewer than five months to pile on an additional $1 trillion in debt. For comparison, it took close to 200 years for total US debt to cross $1 trillion for the first time in 1981, according to analysis by CRFB, although $1 trillion in 1981 would be worth $3.67 trillion in real terms today, after inflation is taken into account.

The CBO estimates that debt will rise from 101 percent of gross domestic product (GDP) in 2026 to 120 percent in 2036. That is well above the previous US record of 106 percent after World War II. There have been two major crises in nearly two decades, during which governments have needed to borrow and increase spending.

The 2007-09 recession was the first crisis, while the second was the 2020-23 COVID-19 pandemic, which is linked to about one-third of the debt run up since 2017, as borrowing under both the Trump and Joe Biden presidencies intensified. Analysts say another reason for rising borrowing is that tax and other revenues are not keeping up with spending, especially as the US is spending more to fund pensions and healthcare for an ageing population. Experts say Democratic and Republican administrations alike have failed to rein in spending or raise taxes to close this gap.