America's Debt Hits $40 Trillion: Over $1T Interest Bill Nearly Matches Defense Spending

Americans borrowing for a house or a car are helping to pay their government's interest bill, which has already exceeded the military budget. The United States this week passed $40 trillion in national debt, and interest alone now exceeds $1 trillion a year.

The Treasury Department's daily statement, published on Wednesday, put the total at $40.05 trillion as of Tuesday, 18 August. The previous trillion took five months to accumulate. The Congressional Budget Office (CBO) projected in 2023 that the $40 trillion mark would not arrive until the 2028 fiscal year.

Michael A. Peterson, chief executive of the Peter G. Peterson Foundation, said on 19 August that 'we've doubled the federal debt in less than 10 years.' His foundation, which tracks federal borrowing, puts interest costs above what the country now spends on national defence.

How Big the Interest Bill Has Become

Treasury's monthly statements show the government paid $931B in interest over the first 10 months of the 2026 fiscal year, against $842B across the same months a year earlier, as the chart below shows.

Interest now trails only Social Security and Medicare among federal spending categories, according to the Peterson Foundation. The foundation notes the bill would have ranked second without timing shifts in other payments. The cost has roughly doubled since 2022, when it came to $476B.

Lenders are charging more for each new dollar as well. A $25B auction of 30-year Treasury bonds in August cleared at 5.216%, the highest yield since 2001. Freddie Mac put the average 30-year mortgage rate near 6.7% in mid-August, and fixed mortgage pricing tracks long-dated government yields.

Why the Defence Comparison Needs a Caveat

The two numbers in that comparison are not the same kind of measurement, and the difference decides the answer. In the 2025 fiscal year, the government paid $970B in interest and spent $916B on national defence. Interest had already passed the military on the money actually paid out, as the graphic below shows.

The $1.15 trillion attached to defence is an authorisation rather than a payment. The House of Representatives passed its version of the 2027 National Defense Authorisation Act (NDAA) on 22 July by 216 votes to 212. The Senate has yet to agree on a final text, and nothing is spent until appropriations follow.

Measured against money that has actually left the Treasury then, the interest bill is not approaching the military budget. Interest passed defence spending a year ago, and the margin has widened since.

The Objection That Comes First

A standard reply is that the $40 trillion gross figure overstates the problem, because it counts money the government owes itself. Debt held by the public, the measure most economists prefer, stood near $32.3 trillion. That is the portion owed to outside lenders rather than to federal trust funds.

The narrower measure is no more comfortable. Debt was worth about 122% of annual US economic output in early 2026, and interest absorbs roughly 19% of federal revenue, a share the CBO expects to reach 26% by 2036.

The other reflex is to cut the Pentagon. The arithmetic does not add up. Borrowing between October and July came to $1.8 trillion. That is more than the $1.15 trillion the House has authorised for a full year of defence, so scrapping the military outright would still leave Washington in deficit.

Maya MacGuineas, who is president of the Committee for a Responsible Federal Budget, told Bloomberg Television on 18 August that cutting the deficit was the 'single most important thing' lawmakers could do about affordability. Her group wants deficits capped at 3% of economic output, about half where they sit now.

Margaret Spellings, president and chief executive of the Bipartisan Policy Center, told the broadcaster NPR that the country is 'speeding toward a cliff and refusing to turn the wheel.' Congress set the borrowing limit at $41.1 trillion in 2025. At the pace of the past five months, lawmakers will reach it in the opening weeks of 2027.