US National Debt Surpasses $40 Trillion as Bond Yields Rise

2026-08-20

The BareStory

The accumulated national debt of the United States has exceeded $40 trillion, according to a Wednesday update from the Treasury Department. The federal deficit is projected to grow by more than $2 trillion this year as government spending continues to outpace tax revenues. The rapid growth of the debt during a period of relative prosperity is expected to reduce the nation's fiscal flexibility to handle future major challenges.

In response to concerns over inflation and federal spending, the U.S. bond market has experienced a sharp sell-off, causing bond prices to decline and yields to rise. This movement pushed the yield on the 30-year government bond to its highest level since 2007. According to Freddie Mac, the average rate on a 30-year fixed-rate mortgage reached 6.67% last week, reflecting a broader rise in borrowing costs across the economy.

To service the debt, the government is projected to spend over $1 trillion on interest payments this year, representing a 15 percent increase from last year. The U.S. currently pays approximately $3 billion per day in interest, making it the government's second-largest expense after Social Security. This spending growth follows a major legislative package that extended tax cuts and increased funding for border security.

Left Perspective

Revenue Drainage Fuels Deficits
Yield Surges Punish Homeowners
Interest Costs Crowd Out Welfare

Right Perspective

Fiscal Overreach Distorts Capital
Bond Markets Force Accountability
Interest Obligations Stifle Prosperity

Left Perspective

• Revenue Drainage Fuels Deficits Prioritizing tax cuts for corporations and high earners starves the public treasury of vital resources, forcing the government to run a projected $2 trillion deficit despite economic prosperity. This supply-side approach fails to generate self-funding growth and instead transfers the burden of national debt onto the public. By eroding the tax base, this legislative package drives interest payments to $3 billion per day, limiting the state's capacity to invest in critical infrastructure and social safety nets.

• Yield Surges Punish Homeowners Protecting middle- and lower-income families from market exploitation requires stable, affordable borrowing costs. The bond market sell-off, which pushed the 30-year mortgage rate to 6.67%, acts as a regressive tax that locks ordinary citizens out of homeownership and wealth accumulation. As rising yields elevate borrowing costs across the economy, the financial system extracts wealth from everyday consumers to service the interests of institutional lenders and bondholders.

• Interest Costs Crowd Out Welfare Maintaining robust public welfare systems is essential for social equity, but skyrocketing debt servicing costs pose an existential threat to these protections. With interest payments projected to exceed $1 trillion this year—making it the second-largest federal expense after Social Security—public funds are diverted away from vulnerable citizens to satisfy bondholders. This dynamic risks a manufactured fiscal crisis where austerity advocates will target vital entitlement programs under the guise of fiscal responsibility.

Right Perspective

• Fiscal Overreach Distorts Capital Systemic stability depends on fiscal discipline and allowing free markets to allocate capital efficiently without state distortion. Running a $2 trillion deficit during a period of relative prosperity demonstrates a failure of spending restraint, particularly through unchecked entitlement commitments and bloated federal budgets. When government spending consistently outpaces revenues, it forces the state to borrow excessively, directly driving the national debt past the unsustainable $40 trillion threshold.

• Bond Markets Force Accountability Market forces act as the ultimate arbiter of fiscal health, sending clear signals when state policy becomes unsustainable. The sharp sell-off in the U.S. bond market, pushing 30-year yields to their highest level since 2007, represents a rational market correction to persistent federal deficits. These rising yields are a necessary mechanism to discipline the government, forcing policymakers to confront the reality that unlimited borrowing carries severe economic consequences.

• Interest Obligations Stifle Prosperity Sustained prosperity requires preserving national creditworthiness and the strategic flexibility to navigate future economic shocks. Spending over $1 trillion annually on interest payments—equivalent to approximately $3 billion per day—consumes productive capital that could otherwise drive private-sector innovation and investment. This massive drain on resources limits the country's capacity to handle major challenges, leaving the economy highly vulnerable to systemic crises and eroding long-term financial sovereignty.

How it may affect me

As a U.S. reader:

• You may face higher borrowing costs in the short term, such as average 30-year fixed mortgage rates rising to 6.67 percent, making it more difficult to purchase a home and build wealth.

• You could see reduced government spending on critical infrastructure, social safety nets, and public welfare programs over the long term as federal interest payments rise to over 1 trillion dollars this year.

• You may experience a less stable and less resilient economy, with the government having reduced financial flexibility to respond to future economic shocks or major crises.

• You may find fewer economic opportunities over time as heavy government debt servicing drains productive capital that could otherwise support private-sector innovation and investment.

US National Debt Surpasses $40 Trillion as Bond Yields Rise

The BareStory

Left Perspective

Right Perspective

How it may affect me

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