While Trump promises to cut spending, US debt hits record $40 trillion and worries investors

The US national debt exceeds US$40 trillion for the first time The United States' public debt exceeded US$40 trillion for the first time this Wednesday (19), a historic milestone amid increased spending on defense, social programs and the rising cost of interest in the country. The value was reached just five months after American debt surpassed US$39 trillion in March. Another US$1 trillion had been added about five months earlier, in October, when the debt reached US$38 trillion, according to data from the US Treasury Department. US debt worries global markets after Trump's mega package; understand The increase in debt occurs while the United States government maintains expenditures that exceed revenues. ?? The United States spent around US$954 billion on defense in 2025, according to the Stockholm International Peace Studies Institute (SIPRI), equivalent to approximately 37% of all military spending in the world. By 2026, American spending is expected to exceed US$1 trillion. Furthermore, the war against Iran had already cost the United States $37.5 billion by July 21, 2026, according to American Defense Secretary Pete Hegseth. The Pentagon also asked Congress for an additional $67.1 billion to finance the war and other military expenses. American President Donald Trump has promised to reduce expenses and has been focusing the cuts on the public sector, with reductions in employees, federal agency programs and foreign aid. At the same time, the government is also seeking to cut spending in some areas and eliminate expenses it considers unnecessary. US President Donald Trump points his finger while answering questions from the press after signing an executive order establishing the Presidential Commission on Military Spouses, which will be chaired by Jennifer Rauchet, wife of Secretary of Defense Pete Hegseth, in the Oval Office of the White House, in Washington, DC, USA, on August 3, 2026 REUTERS/Evelyn Hockstein ?? To cover the difference, the Treasury issues public bonds and takes money borrowed from investors, with the promise to return the amount plus interest. The greater the debt and the interest charged, the greater the cost to the government. This pressure has increased in recent days. On Tuesday (18), the yield on the 30-year US Treasury bond reached 5.34%, the highest level since 2007. The indicator represents the return required by investors to lend money to the government for a period of 30 years. ? What are public bonds? These are papers issued by the government to "borrow money from investors". Whoever buys a bond receives the money back in the future, with interest. It is one of the ways used by the government to finance its expenses. How the Treasury tries to contain pressure on the market It was in this scenario that the Treasury Department announced on Wednesday (19) that it will more than double the size of some long-term bond repurchase operations, from US$2 billion to at least US$4 billion per operation. Buyback is a debt management tool. The Treasury buys back securities that are in the hands of investors, in an attempt to improve the functioning and liquidity of the market, that is, to facilitate the purchase and sale of these securities. The measure was announced after the rise in interest rates on long-term bonds, amid investor concerns about the American fiscal situation and the effects of the war with Iran on inflation and government spending. Following the announcement, the 30-year Treasury yield fell to around 5.18%. The objective is to reduce pressure on the public securities market and facilitate the trading of these securities. Why is debt growing? American debt results from decades of deficits. When the government spends more than it collects, it needs to seek resources in the market to cover the shortfall. Debt increased sharply during the Covid-19 pandemic, when the government increased spending to support the economy. In recent years, there have also been spending increases and tax cuts approved during the Trump administration. Since 2017, American debt has more than doubled. Since the start of Trump's second term in January 2025, the stock has increased by about $3.8 trillion, according to Reuters. Debt interest is already one of the biggest expenses. The growth in debt also increases the amount that the government needs to disburse to pay the interest on previously issued bonds. ?? In the first ten months of fiscal year 2026, spending on debt interest has already exceeded spending on Medicare, a health program aimed mainly at seniors. Interest has become the second largest federal expense, behind only Social Security, according to Reuters. Higher interest rates can also affect consumers and businesses. US Treasury bonds serve as a reference for other interest rates in the economy. When your income rises, mortgages, car loans and business credit can become more expensive. Debt Could Approach Legal Limit The United States has a limit on how much the federal government can borrow. The ceiling is defined by Congress and can be raised, suspended or abolished by parliamentarians. The current limit is US$41.1 trillion. According to an estimate by the Bipartisan Policy Center, the American government could reach this amount between the end of winter and mid-summer of 2027. The US$40 trillion mark, therefore, brings the country closer to a new debate on the debt limit in Congress. The number alone does not mean that the United States is close to a crisis. Economists mainly monitor the debt trajectory, the government's ability to pay interest and the willingness of investors to continue financing the country.