- U.S. federal debt hit a record $40 trillion this week, having doubled since 2017. Just paying interest on this debt now costs the government more than $1 trillion a year.
- Treasury Secretary Scott Bessent announced increased bond buybacks on Wednesday, which temporarily lowered yields.
- However, yields rebounded on Thursday, with the 30-year yield ending at 5.237%.
- Stocks sold off today, with the Dow dropping 700 points, amid rising yields and weak Walmart earnings.
- Oil prices rose 2.4% to $93.78 a barrel after Trump vowed maximum pressure on Iran.
- The annual interest on the accumulated debt now tops $1 trillion, making it the government's second-biggest expense, behind only Social Security.
- The government has spent more money than it collects in taxes, driven by political choices and automatic spending increases as baby boomers age into retirement.
- Historically, debt as a share of the economy tends to rise during recessions, but the government has run large deficits even during economic expansions.
- The bond market is signaling that Congress will have to raise taxes, cut spending, or do both to address the growing debt.
- Carolyn Bordeaux, executive director of the Concord Coalition, stated that $40 trillion should be a wake-up call for both parties to change course.
The U.S. national debt has reached a staggering $40 trillion, doubling since 2017, with interest payments now exceeding $1 trillion annually. This financial burden has made interest the government's second-largest expense, following Social Security.6
The Treasury Department's recent report highlights the alarming growth of debt, driven by factors such as increased spending during the pandemic and the aging baby boomer population, which raises costs for Social Security and Medicare.
“When the government borrows this much, and the rates for Treasurys go up, that brings up the rates for everything else,” warns Michael Peterson, CEO of the Peter G. Peterson Foundation. This has led to rising mortgage rates, with the 30-year home loan rate nearing 6.7%.
In response, Treasury Secretary Scott Bessent announced plans to increase bond buybacks, potentially exceeding $4 billion. However, this intervention has had only a temporary effect on yields, which rebounded shortly after the announcement.2
“$40 trillion should be a wake-up call,” stated Carolyn Bordeaux, executive director of the Concord Coalition. She emphasized the need for both political parties to take responsibility and change course to address the growing debt crisis.10
Ultimately, experts suggest that Congress will need to consider raising taxes, cutting spending, or a combination of both to manage the escalating debt effectively.
“The debt has doubled since 2017, and interest payments now rank as the government's second-biggest expense behind Social Security. Bond yields rebounded Thursday, with the 30-year yield ending at 5.237%, as Bessent's intervention proved short-lived.”
NPR
