U.S. Debt Surpasses $38 Trillion Amid Government Shutdown and Rising Fiscal Strain

Washington hits new debt record during fiscal standoff

The United States has surpassed $38 trillion in gross national debt, marking the fastest accumulation of federal borrowing outside of the pandemic era, according to new data from the Treasury Department.

The milestone comes as the federal government remains partially shut down, with lawmakers deadlocked over budget negotiations and long-term fiscal reforms. The U.S. debt level, which stood at $37 trillion in August 2025, rose by another trillion dollars in less than three months — highlighting the nation’s accelerating borrowing pace.

Economists say the trend underscores deep structural imbalances in America’s fiscal policy, where rising interest costs and mandatory spending on programs such as Social Security and Medicare continue to drive deficits despite recent efforts to curb expenditures.

Debt growth accelerates beyond post-pandemic levels

According to Treasury data released Wednesday, the nation’s total public debt outstanding reached $38.01 trillion, a figure that reflects both domestic and foreign-held obligations. The pace marks the fastest trillion-dollar increase since the COVID-19 stimulus years, when emergency spending surged to stabilize the economy.

Kent Smetters, a professor at the University of Pennsylvania’s Wharton School and former Treasury official under President George W. Bush, told the Associated Press that mounting debt contributes to long-term inflationary pressure.

“A growing debt load over time leads to higher inflation, which erodes Americans’ purchasing power,” Smetters said. “That additional inflation compounds, making it harder for future generations to afford homes or maintain living standards.”

The Government Accountability Office (GAO) has repeatedly warned that sustained deficits can result in higher borrowing costs for consumers, lower business investment, and slower economic growth.

Economic implications for households and businesses

The GAO’s most recent fiscal outlook notes that as the U.S. borrows more, the government must compete with the private sector for available credit. That competition tends to drive up interest rates on everything from mortgages to car loans.

Smetters emphasized that rising debt ultimately affects ordinary Americans. “People worry that their children and grandchildren won’t be able to buy homes or achieve the same financial security,” he said. “That erosion in purchasing power builds over time.”

Higher federal debt also constrains public investment. Analysts say it limits Washington’s ability to respond to future crises, fund infrastructure, or expand social programs without adding further to the debt load.

Trump administration cites progress on deficit reduction

Despite the new record, the Trump administration maintains that it is reversing years of fiscal mismanagement through a combination of spending restraint and stronger revenue growth.

Treasury Secretary Scott Bessent said the cumulative deficit from April to September totaled $468 billion, the lowest reading since 2019. In a post on X (formerly Twitter), Bessent called it a “significant turnaround” from the previous fiscal year.

“During his first eight months in office, President Trump has reduced the deficit by $350 billion compared to the same period in 2024 by cutting spending and boosting revenue,” White House spokesman Kush Desai said in a statement.

The administration credits increased tariff revenues, stronger corporate tax receipts, and reduced discretionary spending as key drivers of the decline. It also cited efforts to reduce “waste, fraud, and abuse” within federal programs.

Still, economists caution that deficit reduction over a few quarters does not necessarily reverse the broader upward trajectory of the national debt, which continues to climb due to structural factors.

A trillion-dollar climb — and counting

According to estimates from the Joint Economic Committee, the U.S. national debt has grown by an average of $69,713.82 per second over the past year.

Michael Peterson, chair and CEO of the Peter G. Peterson Foundation, said in a statement that surpassing $38 trillion during a government shutdown underscores Washington’s fiscal dysfunction.

“Reaching $38 trillion in debt during a government shutdown is the latest troubling sign that lawmakers are not meeting their basic fiscal duties,” Peterson said. “We spent $4 trillion on interest over the last decade but are projected to spend $14 trillion in the next ten years.”

Interest payments are now one of the fastest-growing components of the federal budget, outpacing spending increases in defense and healthcare.

Interest costs become long-term economic risk

As interest rates remain elevated, the U.S. government faces mounting costs simply to service its existing debt. The Congressional Budget Office (CBO) projects that annual interest payments will exceed $1 trillion by 2033, potentially surpassing defense spending if current trends continue.

Peterson warned that growing interest costs “crowd out” both public and private investment, constraining resources for education, innovation, and infrastructure. “The debt burden harms the economy for every American,” he said.

The International Monetary Fund (IMF) has also urged advanced economies, including the U.S., to adopt medium-term fiscal consolidation plans to stabilize debt-to-GDP ratios and ensure sustainable growth.

Historical context: an accelerating fiscal climb

The U.S. crossed several debt thresholds in rapid succession — $34 trillion in January 2024, $35 trillion in July 2024, and $36 trillion in November 2024. By early 2025, that figure had risen to $37 trillion, reaching $38 trillion by October 2025.

By comparison, it took nearly a decade for the U.S. debt to grow from $20 trillion (in 2017) to $30 trillion (in 2022). The recent acceleration reflects both higher interest expenses and spending commitments made during and after the pandemic.

Economists note that stabilizing the debt trajectory would require either substantial spending cuts, tax increases, or sustained economic growth above 3 percent — a level the U.S. economy has struggled to maintain in recent years.

Global significance and investor confidence

The United States continues to enjoy strong investor confidence, with Treasury securities remaining a global benchmark for safety and liquidity. However, some analysts warn that persistent fiscal uncertainty could eventually affect credit ratings and global capital flows.

In 2023, Fitch Ratings downgraded the U.S. credit rating from AAA to AA+, citing “fiscal deterioration and repeated debt-limit standoffs.” While markets absorbed the downgrade with limited volatility, rating agencies have continued to caution against long-term policy paralysis.

For now, the U.S. dollar remains resilient, buoyed by global demand for safe assets and the Federal Reserve’s steady monetary policy stance. But as debt levels rise, policymakers face growing pressure to balance short-term political considerations with long-term economic responsibility.

Looking ahead

As the shutdown continues, Congress remains divided over future budget priorities, with Republicans emphasizing spending cuts and Democrats advocating for targeted investments. The administration says it will release an updated fiscal plan in early 2026 aimed at reducing deficits without undermining growth.

Analysts agree that unless structural reforms are enacted, the debt burden will continue to expand — posing risks not just for the U.S. economy but for global financial stability.

Source: AP News – US hits $38 trillion in debt, after the fastest accumulation of $1 trillion outside of the pandemic