The U.S. government's national debt has risen to over $38 trillion, with a deficit of $696 billion recorded during the first four months of fiscal year 2026, from October through January. This increase, which included $94 billion in January alone, was reported by the Congressional Budget Office (CBO). Experts project that continued borrowing could lead to an annual deficit of $1.8 trillion or more.
Current Debt and Deficit Figures
The Congressional Budget Office (CBO) reported that the U.S. government borrowed $696 billion during the first four months of fiscal year 2026, encompassing the period from October to January. This included an increase of $94 billion in January.
The national debt currently stands at over $38 trillion, while the U.S. Gross Domestic Product (GDP) is approximately $31 trillion.
This places the national debt at roughly 100% of the GDP, approaching the historical high of 106% observed after World War II.
Rising Interest Payments
Federal spending on debt interest payments has seen significant increases. Net interest payments for fiscal year 2025 reached a record high, exceeding $1 trillion.
For the current fiscal year, Treasury data indicates interest expenses reached $427 billion by January 31, with annual interest payments projected to reach $1 trillion. Other data noted interest payments of $1.13 trillion in fiscal year 2024 and $1.22 trillion in fiscal year 2025.
These payments represent approximately 18% of annual revenue.
Contributing Factors
Factors contributing to the growing deficit and debt include increased government spending, according to the CBO.
Additionally, a Republican budget reconciliation bill, identified as the "One Big Beautiful Bill Act," reduced corporate income taxes collected by an estimated $22 billion due to increased tax deductions for certain corporate investments.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, stated that continued borrowing at the current rate could result in another year with a deficit of $1.8 trillion or higher.
Economic Implications and Concerns
High deficits and debt are associated with several potential economic outcomes, including:
- Rising inflation
- Increased interest rates
- Slower economic growth
- National security implications
Ray Dalio, founder of Bridgewater Associates, has expressed concerns about the U.S. spending significantly more than it collects, noting that debt service payments could diminish buying power if economic growth does not resolve the debt-to-GDP imbalance.
MacGuineas has emphasized the need for bipartisan cooperation to address borrowing practices.
Market Response and Debt Management Strategies
Despite the rising figures, some reports indicate that markets and many economists remain comfortable with the U.S. fiscal situation. Bond yields, such as 30-year Treasuries at 4.8% and 10-year Treasuries at 4.2%, have not shown signs typically associated with market panic regarding debt risk.
Economists have suggested potential methods for managing U.S. debt that may contribute to investor confidence. These include:
- Financial repression: Mandating institutions to hold more government debt.
- Inflation: Allowing inflation to increase to erode the real value of the debt.
- Quantitative easing: Increasing the money supply to lower the real value of borrowing.
These options suggest the U.S. government may have tools available to address a debt crisis.
Legislative Context
PAYGO (Pay-As-You-Go) laws are designed to control deficits by requiring new spending or tax cuts to be offset by corresponding cuts or revenue increases. However, Congress frequently bypasses these rules.
In November, over 60 senators approved the forgiveness of an estimated $3.4 trillion in deficits resulting from a Republican budget reconciliation bill.