US national debt hit a record $40.53 trillion on 26 October: $32.6 trillion held by the public and $7.9 trillion intragovernmental. The $40 trillion mark was crossed on 18 August; debt is up about $2.5 trillion in a year. But the round number is not the story. The cost of servicing it is.
In fiscal 2026, ended 30 September, net interest outlays were $1.052 trillion - the first time above $1 trillion and 8.4% more than a year earlier. Interest is the third-largest budget item after Social Security and Medicare, and costs more than defence. That is $2.9 billion a day, or 19.5% of all federal revenue. Gross interest is $1.36 trillion before trust-fund offsets.
Fig. 1. US debt: $4.2 trillion in 1993 to $40.5 trillion in October 2026. Data: US Treasury.
Fig. 2. Interest nominal and in 2026 prices. Data: US Treasury, CBO, BLS.
Fig. 3. Interest as a share of federal revenue. Data: US Treasury, CBO.
In fiscal 2026, ended 30 September, net interest outlays were $1.052 trillion - the first time above $1 trillion and 8.4% more than a year earlier. Interest is the third-largest budget item after Social Security and Medicare, and costs more than defence. That is $2.9 billion a day, or 19.5% of all federal revenue. Gross interest is $1.36 trillion before trust-fund offsets.
Fig. 1. US debt: $4.2 trillion in 1993 to $40.5 trillion in October 2026. Data: US Treasury.
Nominal versus inflation
In nominal terms the bill looks scary: $194 billion in 1991 versus $1.05 trillion now, a 5.4-fold increase. Adjusted for inflation the picture is milder: $194 billion in 1991 equals about $476 billion in 2026 prices, so the real increase is 2.2 times. The previous real peak, 1996, was $512 billion in today's money; today's level is double.Fig. 2. Interest nominal and in 2026 prices. Data: US Treasury, CBO, BLS.
Why the bill grew
The reason is not just debt but rates.- Debt: $28.9 trillion in October 2021 versus $40.5 trillion now.
- Rate: 1.61% on interest-bearing debt in September 2021 versus 3.53% now.
- Refinancing: low-coupon debt matures and is replaced at higher yields.
Fig. 3. Interest as a share of federal revenue. Data: US Treasury, CBO.
What next
As a share of revenue, the burden is a record: 19.5% versus 18.4% in 1991. As a share of GDP it is about 3.2%, also above the previous peak. The CBO sees $2.1 trillion by 2036, or 4.6% of GDP. While debt grows faster than the economy, the headline will keep changing - and so will the bill for the past.
⚠ IMPORTANT
My view: the market sees $40.5 trillion as a political headline, but the real risk is how fast the debt is repriced at higher rates. As long as new issues cost more than old debt's average coupon, the bill will rise even if the debt stops growing.