The US’ total public debt skyrocketed over the past quarter-century amid mounting defense spending, the 2008 financial crisis, and budget deficits caused by stimulus packages and tax cuts during the COVID-19 pandemic.
The US public debt surged exponentially over the past 25 years due to the wars waged over the past quarter-century, the country’s massive defense expenditures, and the pandemic, according to the US Treasury Department.
The US public debt stood at $5.8 trillion in August 2001, and it exceeded $10 trillion in 2008 due to defense spending during the Afghanistan and Iraq wars, as well as tax cuts.
The bailout packages implemented after the 2008 global financial crisis also contributed to the rising debt.
The rising public debt reached $20 trillion in 2017. As the COVID-19 pandemic affected the entire world and fueled global inflation, trillions of dollars in stimulus packages were announced to address the fallout, driving public debt over the $30 trillion threshold in early 2022.
The country’s debt burden continued to rise in the post-pandemic period amid defense and public spending.
The US public debt stood at $38.4 trillion at the start of 2026 and rose to $40.1 trillion as of Tuesday, Aug. 18.
It took around four and a half years for the US public debt to rise from $30 trillion to $40 trillion, marking a historic acceleration in the pace of borrowing.
Rising interest costs, an aging population, mounting Social Security payments, revenue-spending imbalances, tax cuts, and stimulus measures during crises have been cited as the main drivers behind the rapid increase in the debt burden, economists say.
The Fed’s keeping rates high to fight inflation more than doubled the interest bill on Treasury bonds, while widespread tax cuts pressured public revenues, and continued defense and social program spending cemented structural budget deficits.
The US federal government’s revenues climbed 5% in fiscal year 2026, beginning in October 2025, according to the Treasury.
The US budget deficit increased 10% over the first 10 months of the fiscal year through the end of July.
New interest payments on the public debt reached $1 trillion during the first 10 months of the fiscal year.
The total public debt-to-gross domestic product ratio rose to 123.7% in the second quarter of 2020 and fell to 115.6% in the first quarter of 2023, according to the Fed.
The public debt-to-GDP ratio reached 122.6% as of the end of the first quarter this year.
The US public debt had exceeded the size of the economy for the first time in 2012.
Meanwhile, US Treasury bond yields are on the rise amid growing public debt, heavy corporate borrowing due to massive artificial intelligence (AI) infrastructure spending, tensions with Iran, and inflation concerns due to mounting oil prices, while investors demand a higher risk premium amid global financial uncertainty.
Although long-term yields somewhat declined after US President Donald Trump took office for his second term, US-Iran tensions drove bond yields to their highest levels in nearly 20 years.
The Treasury Department announced on Wednesday that it would at least double the size of its long-term bond buyback operations, bringing some temporary relief, but economists say there are few signs that the US’ massive budget deficits, which are pressuring the bond market, will improve any time soon.
The nonprofit Committee for a Responsible Federal Budget (CRFB) recently said the country’s public debt increased by $1 trillion in less than five months, while doubling over the past 10 years and quadrupling in less than 20 years.
It took nearly 200 years for the US’ total debt to reach $1 trillion for the first time in 1981, when former President Ronald Reagan urged a wake-up call, but now the US is spending more than that amount on interest payments alone.
“$40 trillion of debt doesn’t exist solely on the government’s ledgers; it is felt throughout the economy and finds its way to the pocketbooks of people one way or another,” said Maya MacGuineas, president of the CRFB. “The more we borrow, the more we exacerbate inflation, squeeze out other priorities in the budget, and leave ourselves vulnerable to emergencies at home and turmoil abroad.”
She noted that the US’ fiscal situation will not improve overnight but that committing to not making new borrowings could be a first step toward improvement.
“No one knows how many more of these milestone America can take,” she added.
