The U.S. government’s debt has surpassed the symbolic mark of 40 for the first time.
The U.S. government debt has surpassed for the first time the symbolic $40 trillion mark, according to data released Wednesday by the Treasury Department, as borrowing costs rise.
After the latest bond issuance on Tuesday, U.S. Treasury debt now stands at $40.047 trillion, due to increases in both health and Social Security-related borrowing, as well as interest payments.
This is a faster rise than expected, with the Congressional Budget Office (CBO) previously anticipating federal debt to be around $39.4 trillion by the end of the year.This comes as concerns about inflation, especially with the conflict in the Middle East and the surge in energy prices, have pushed borrowing costs to levels not seen in years.
The yield on long-term Treasury bonds (30 years) hit its highest level since 2007 on Tuesday. This forces the government to spend more and more to refinance itself, thereby worsening its debt.
The Finance Ministry stepped in on Wednesday by announcing larger long-term bond buybacks starting in September, which reassured investors and eased rates.
“Alerts”
“It is well known that the federal government has a deficit pace that is unsustainable,” emphasized Jessica Riedl, a budget specialist at the Brookings Institution.
The country’s debt has more than doubled since the 2008 financial crisis and now represents a ratio of nearly 125% of the U.S. gross domestic product (GDP).
While deficits of 3% to 4% of GDP used to worry financial markets, Riedl pointed out that these levels are now approaching 6% to 7% of GDP.
“This has made the markets more nervous,” she added.
“The president promised to pay off the debt during his first term. We all knew that was a lie. Instead, he let it go up to $40 trillion while he and his family pocketed billions,” criticized Democratic Senator Mark Kelly on X.”Congress needs to control spending and BALANCE THE BUDGET. Americans deserve better,” commented Republican Senator Rick Scott, also on X.
Donald Trump promised during his two terms to cut government spending and reduce the annual deficit.
Treasury Secretary Scott Bessent had stated that his goal was to bring the U.S. deficit down to 3% of GDP.
However, it has widened in recent months, notably due to the refund of tariffs to companies, which were canceled by the Supreme Court in February.
Tax cuts and military spending, particularly related to the conflict with Iran, have also eaten up many billions of dollars.
Analysts point out that there is no level of debt relative to GDP that automatically triggers a crisis.They also point out that the debt held by the public, which excludes claims of one federal agency on another, is generally a more closely watched indicator than total debt.
“But from a psychological point of view, it’s these benchmarks that alert financial markets to the need to take another look at rising debt,” says Ms. Riedl.
Federal borrowing jumped during the 2007-2009 financial crisis and rose sharply again during the recession triggered by Covid-19, Caleb Quakenbush, director of budget policy at the Bipartisan Policy Center, reminds AFP.
According to him, the trajectory of U.S. budget spending hasn’t been addressed by Congress or U.S. administrations in a “significant or lasting” way, which could pose serious challenges in the event of a new crisis.
