US Public Debt Tops $40 Trillion as Long-Term Yields Hit 18-Year High

How US Debt Crossed $40 Trillion in Under Five Months

The United States' public debt crossed $40 trillion for the first time on Wednesday, August 19, according to Treasury data — a milestone that comes just five months after the figure passed $39 trillion in March and roughly ten months after it hit $38 trillion. The acceleration reflects a federal government that continues to spend more than it collects in revenue.

The climb is being driven in part by defense and war-related outlays. US military spending reached about $954 billion in 2025, or roughly 37% of global military expenditure, according to the Stockholm International Peace Research Institute, and is projected to exceed $1 trillion in 2026. On top of that, the Pentagon says the war against Iran had cost $37.5 billion through July 21, 2026, and has requested an additional $67.1 billion from Congress.

The cost of carrying that debt has become a separate problem. On Tuesday, the yield on the 30-year Treasury bond rose to 5.34%, the highest level since 2007, reflecting the higher return investors now demand to lend to the US government over three decades. In response, the Treasury announced it will more than double the size of some long-term bond buyback operations, from $2 billion to at least $4 billion per operation, to support market liquidity. The 30-year yield subsequently eased to about 5.18%.

This matters well beyond Washington. Treasury yields anchor borrowing costs across the US economy, so persistent increases can push up mortgage rates, car loans and corporate credit. And with the statutory debt ceiling currently at $41.1 trillion, the government is now closer to another politically contentious debt-limit fight.

Why Debt Service Is Becoming Washington's Second-Biggest Expense

The Debt-Service Crossover: Interest Payments Now Outpace Medicare

In the first ten months of fiscal 2026, interest on the federal debt surpassed Medicare spending, making debt service the second-largest federal expense behind Social Security, according to Reuters. That crossover means a growing share of tax revenue is absorbed by the cost of past borrowing rather than current services or investment — a constraint that narrows future fiscal options regardless of which party controls Congress.

Defense and War Costs Are Only Part of the Deficit Story

The data show defense spending approaching $1 trillion and $37.5 billion in direct war costs through mid-July. But this is layered on decades of structural deficits, pandemic-era stimulus and the 2017 tax cuts, which together help explain why total debt has more than doubled since 2017. Defense accelerates near-term borrowing, yet the underlying mismatch between revenue and spending predates it.

What the Treasury's Buyback Doubling Actually Signals

By doubling repurchase operations from $2 billion to at least $4 billion, the Treasury is using a debt-management tool to reduce pressure on the long end of the curve — not to shrink the debt stock. Buybacks can improve liquidity and smooth trading, but they do not close the fiscal gap. The market's immediate reaction, a fall in the 30-year yield to about 5.18%, shows the announcement calmed some selling pressure, though its effect on the structural trajectory is limited.

The Debt-Ceiling Clock Is Now a Front-Burner Risk

With the ceiling at $41.1 trillion and the Bipartisan Policy Center estimating the limit could be reached between late winter and mid-summer 2027, the $40 trillion milestone raises the political salience of the next debt-limit negotiation. Economists emphasize that the headline number alone does not signal an imminent crisis; the real variables are the debt's trajectory, the government's ability to service interest and investors' willingness to keep financing the country — and all three are now moving in a more strained direction.

What the Fiscal Shift Means for Investors and Borrowers

• The 30-year Treasury yield's move from 5.34% to 5.18% after the buyback announcement shows the long end remains sensitive to liquidity measures — but investors should treat 5%-plus long-term yields as a base case, not an anomaly, until fiscal data improve.
• Businesses reliant on credit should factor in that Treasury yields anchor commercial borrowing; the surge to 5.34% before intervention shows how quickly long-term financing costs can reset in the current environment.
• Watch the Pentagon's $67.1 billion supplemental request as a near-term deficit driver — approval would materially raise the odds of accelerated Treasury issuance in the coming quarters.
• The Bipartisan Policy Center's window of late winter to mid-summer 2027 for hitting the $41.1 trillion ceiling is the concrete deadline to watch for a political repricing of Treasury risk.
• For households, the operative link is mortgage and auto rates: sustained long-term Treasury yields above 5% tend to feed into fixed-rate borrowing costs, so decisions on long-term financing should price in that scenario.