The federal debt topped $40 trillion Wednesday, a new high-water mark for red ink that shows no sign of receding.
The news, reported by the Treasury Department in its daily financial update, comes just five months after the debt surpassed $39 trillion. The government continues to pile up debt at a rapid clip, as spending outstrips revenue by more than $2 trillion a year.
"Our current fiscal trajectory is plainly unsustainable, and that's the best-case scenario," said Margaret Spellings, president of the Bipartisan Policy Center. "Even in the rosiest scenarios, we're speeding toward a cliff and refusing to turn the wheel."
The deficit widened further after the Supreme Court struck down many of President Trump's tariffs, forcing the Treasury to refund more than $100 billion in import taxes that were collected illegally.
Government spending continues to surge
The administration sought to blame the ballooning deficit on Democrats.
"President Trump pledged to clean up Joe Biden's fiscal mismanagement," White House spokesman Kush Desai said in a statement. "That's why the Trump administration has been focused on slashing waste, fraud, and abuse in federal spending while accelerating economic growth to get America's debt-to-GDP ratio trending in the right direction again."
Government revenues have grown 3% this fiscal year — but spending has grown even faster. And the debt-to-GDP ratio has worsened since Trump returned to the White House.
The government is spending more than a trillion dollars a year just to pay interest on the mounting debt. Interest is now the government's second-biggest expense, trailing only Social Security.
Interest costs in the first 10 months of this fiscal year were 15% higher than they were in the same period a year ago. That reflects not only the growing debt but also the higher interest rates that investors are now demanding in order to keep lending the government money.
Bond markets are reacting
The yield on 30-year Treasurys reached a 19-year high this week. That raises borrowing costs for everyone else, since mortgage rates and other interest rates often follow long-term Treasurys.
The average rate on a 30-year mortgage neared 6.7% last week, according to Freddie Mac.
"Federal debt is already raising the cost of living and choking out other spending and investment, threatening our economy and Americans' long-term prosperity," Spellings said.
So far, Congress has shown little appetite for tackling the problem.
"$40 trillion should be a wake-up call. But neither Congress nor the president have a credible plan to stop it from growing," said Carolyn Bourdeaux, executive director of Concord Action, a group that advocates for fiscal responsibility. "We owe the next generation better than this crushing debt and another hollow promise that someone else will deal with it later."
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