US National Debt Tops $40 Trillion, Sparking Cost Concerns

The US national debt surpassed $40 trillion for the first time on Wednesday, August 19, 2026, according to Axios, raising fresh concerns about how rising federal borrowing could affect Americans' finances. The gross federal debt figure includes debt the government owes itself, while economists typically focus on the roughly $32 trillion held by the public when assessing the debt's economic impact.

Americans do not personally owe the national debt, but rising debt could pressure lawmakers to raise taxes, cut spending or change federal benefits, according to Axios. President Trump's tax-and-spending law is projected to add trillions of dollars to federal deficits over the next decade, while the White House has also sought tens of billions of dollars in additional funding tied to the Iran war, the report said.

A new report from the Conference Board, a nonprofit think tank, found that a higher US federal debt could make mortgages, student loans and small-business borrowing more expensive by putting upward pressure on interest rates. "If investors begin to view U.S. debt as riskier, interest rates could rise further, increasing borrowing costs for expansion, hiring, and investment," the report said, according to Axios.

Brett Loper, executive vice president for policy at the Peter G. Peterson Foundation, said mortgage rates tend to move closely with the yield on the 10-year Treasury note, which reflects the return investors demand to lend to the federal government. "If it is costing more and more for the government to borrow ... it's going to push up mortgage rates," Loper said, adding that higher borrowing costs can also filter through to auto loans and school construction bonds.

The rising US national debt also carries inflation risks, Loper said, if investors begin to fear that policymakers will eventually rely on inflationary measures to manage the government's fiscal problems. "You're creating risks that we're going to have to print more money or monetize the debt in some way, and those types of fears cause pressure on inflation," he said.

As the debt grows, the federal government must devote more money to interest payments, leaving lawmakers less room to fund priorities such as defense, infrastructure and education. The government is projected to spend more than $1 trillion on net interest in 2026, more than on any mandatory program other than Social Security or Medicare, according to Congressional Budget Office projections cited by Axios.

Washington has shown little appetite for changing the country's fiscal trajectory, Axios reported. Loper said Americans "are starting to connect the dots" about how the US national debt and interest rates affect them, particularly through high mortgage rates, which could influence how they vote in the midterm elections. Putting federal debt on a more sustainable path would require some combination of slower spending growth and higher revenue, according to the Congressional Budget Office.

The rise in US debt 2026 comes as global bond markets remain sensitive to shifts in government borrowing, a dynamic also visible in other economies, including recent pressure on the Indian rupee that prompted RBI intervention. Further information on federal borrowing is available through the US Department of the Treasury and the Congressional Budget Office.