Trump’s America faces a ‘doom loop’ as it falls in a $56 trillion hole

Total US public debt surpassed $US40 trillion ($56 trillion) for the first time, and has now surged by a third in less than five years, as US lawmakers continue to shrug off calls to contend with historically wide fiscal deficits.

Public debt outstanding stood at $US40.05 trillion as of the close of business on Tuesday (Washington time), a Treasury Department release showed.

The news came hours after Treasury Secretary Scott Bessent made a fresh attempt to rein in long-term borrowing costs from multi-year highs – a notable component of the growth in debt. The Treasury said it’s ramping up a buyback program for longer-dated securities, in an announcement that sent yields lower.

The crossing of the $US30 trillion mark only dates back to January 2022, illustrating the rapid growth in federal borrowing needs. And there’s no end in sight.

Republicans have long opposed revenue-raising tax increases, while both parties have been loath to sign on to politically toxic cuts to healthcare and retirement benefits for seniors. Many observers anticipate Congress and the administration of the day will only act if forced by a financial-market disruption.

That’s not for lack of talk about the issue in Washington. Bessent, for one, said a key reason he got involved in politics was to help tackle deficits running at a pace unprecedented for times outside of major wars, pandemics or depressed job markets.

Yet economists, the Congressional Budget Office and Wall Street all see little or no progress in coming years for the deficit-to-gross domestic product ratio.

“Optically, I’m sure crossing thresholds like $US40 trillion will focus attention on the issue in the near term,” said Matthew Luzzetti, chief US economist at Deutsche Bank.

“But it does not represent a magical threshold for debt dynamics, and projections have anticipated this outcome for some time.”

More important, Luzzetti said, is the climb in US Treasury yields, which is steadily increasing the cost of servicing the record debt load. Last Thursday, the department’s latest 30-year bond auction resulted in the costliest such sale in a quarter of a century. A 10-year auction a day earlier drew the highest financing cost at that tenor since 2007.

As buyers demand higher yields, that in turn drives up the Treasury’s borrowing needs. With two months left to go in the fiscal year, the government’s tally for interest costs so far for 2026 is $US1.17 trillion – a 15 per cent increase on the same period a year before. That in turn adds to the debt, potentially fuelling further investor calls for higher rates, in a pattern known as a “doom loop.”

Interest costs are now the third-largest part of the budget, after healthcare and Social Security.

The public debt figure includes both the marketable Treasuries that investors focus on and “intragovernmental” debt, which reflects items such as past surpluses in the Social Security system that were parked into specially issued Treasuries.

“The federal budget is the enemy within,” Douglas Holtz-Eakin, president of the American Action Forum and a former director of the CBO, wrote in a note.