US debt soars to 40,000 billion. The Treasury doubles its bond purchases
Debt is rising faster than expected due to lost revenue from tariffs, following the Supreme Court’s ruling, and the costs of the war with Iran. The Treasury has launched a massive buyback programme for long-term Treasuries to stem the surge in yields
from New York Marco Valsania and Luca Veronese
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US public debt has reached 40,000 billion dollars. Yesterday evening, it officially crossed the symbolic threshold of Forty Trillion, equivalent to 124 per cent of GDP, months ahead of the already worrying forecasts by the Congressional Budget Office. This sharp acceleration has also set alarm bells ringing for Donald Trump’s administration: the Treasury has rushed to take remedial action and announced that it would double its buybacks of longer-term bonds (those under the most pressure, with yields on 30-year bonds at their highest levels in nearly twenty years), hastily revising a schedule of operations announced just a few weeks ago.
The mountain of debt amounts to $117,161 for every American and forces the government to pay up to 1,400 billion in interest each year: more than the Pentagon’s entire budget. But the stakes are much higher. Interest payments divert resources away from other economic strategies. High interest rates, particularly during a crisis, strain the finances of households and businesses by setting benchmarks for access to credit that are difficult to meet. But above all else, high levels of debt and record-high interest rates call into question the strength of US leadership.
There are specific reasons behind the latest surge in national debt, comprising over 32,000 billion in securities held by foreign investors and governments (equivalent to 101 per cent of GDP) and nearly 8,000 billion held by government bodies. Lower revenue from trade tariffs is now taking its toll: the Supreme Court ruling that rejected Trump’s challenge has deprived the budget of 2,000 billion in revenue. This blow, however, has compounded the more structural and deep-seated causes: from the extraordinary expenditure inherited from recessions and the pandemic; to extensive, unfunded tax cuts (Trump’s ‘One Big Beautiful Bill’ tax reform creates a shortfall of 2,400 billion over ten years); and to an ageing population, with rising costs for healthcare and pensions.
Compounding the situation is the competition posed to Treasury bonds by the avalanche of debt issued – or in the process of being issued – by Big Tech firms to finance their massive AI projects. A greater appetite than admitted: off-balance-sheet, thanks to accounting manoeuvres analysed by the Wall Street Journal, these giants have accumulated a debt of 3,000 billion, three times the amount acknowledged and double what was estimated three months ago.
“The debt is growing steadily and rapidly; there is an urgent need for a historic adjustment to spending and tax levels,” explain analysts at the Institute for Economic Policy Research at Stanford. Six months ago, the Congressional Budget Office had forecast that it would reach $39,400 billion in the current financial year. Two days ago, however, the Treasury announced that ‘the debt has exceeded $39,900 billion’ and is continuing to rise.
