Key data: National debt total approximately $39 trillion · Debt-to-GDP ratio 100.2%, the first time since World War II · FY 2026 interest expenditures $1.039 trillion · Annual deficit approximately $2 trillion · Congressional Budget Office predicts debt will reach 175% of GDP by 2056 · Debt increases by $5 to $8 billion daily

Section 1 — A historic milestone with no celebration

In March 2026, the United States crossed a threshold that had never been surpassed during peacetime since the end of World War II. The government's debts to external creditors—that is, "publicly held debt," excluding debts to government internal trust funds like Social Security—reached $31.27 trillion. Meanwhile, the nominal GDP of the United States over the past twelve months was $31.22 trillion. The debt-to-GDP ratio officially surpassed 100%.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said bluntly: "It has happened—U.S. national debt now exceeds the size of the U.S. economy, roughly twice the historical average."

According to U.S. Treasury data, as of May 18, 2026, the total national debt of the United States precisely stood at $39,008,999,901,378.68. This number increases by about $5 to $8 billion daily, with a daily average increase of about $7.5 billion over the past twelve months. The debt surpassed $1 trillion in 1981, exceeded $10 trillion in 2008, surpassed $20 trillion in 2017, and has nearly doubled in the past eight years.

Phillip Swagel, director of the Congressional Budget Office, issued a grim warning in February 2026: "Our budget outlook consistently indicates that the current fiscal trajectory is unsustainable." Under the current legal framework, federal debt will surpass the historical peak of 106% of GDP set in 1946 before the end of World War II—by 2030. By 2036, it will reach 120% of GDP, and by 2056, it will reach an astonishing 175%. Unlike the historical experience post-World War II, where strong growth and fiscal discipline gradually reduced the debt, there are no signs of natural compression of the current debt level.

Educational note: National debt is typically discussed in two terms. "Total government debt" encompasses all debts owed by the federal government, including debts to government internal trust funds like Social Security. "Publicly held debt" refers to the debts owed by the government to external creditors, namely investors, foreign governments, and financial institutions that purchase U.S. Treasury bonds. The latter is more significant from an economic perspective because it represents real external borrowing. Both metrics are currently at historical highs in peacetime.

Section 2 — Why the debt has become entrenched

The U.S. debt problem has not erupted suddenly; it is the result of decades of structural choices—round after round of tax cuts without corresponding reductions in spending, increasing spending without corresponding revenue sources, coupled with a compounding interest effect. Understanding this history helps explain why addressing this issue is so difficult.

Structural gap between government spending and revenue. Since 1970, the federal government has achieved a budget surplus only four years, with every other year in deficit. Whenever government spending exceeds tax revenue, the shortfall is covered by issuing Treasury bonds. These bonds accumulate into debt, and the interest expenses generated by annual deficits further exacerbate the deficit. It is a compounding spiral.

Three categories driving spending growth. The federal budget has three dominant and continuously expanding spending centers. Social Security expenditures reached $953 billion in the first seven months of FY 2026; Medicare expenditures during the same period amounted to $588 billion; and net interest expenditure on public debt reached $628 billion in these seven months, exceeding the combined total of Medicare and Medicaid. These three expenditure categories have structural characteristics driven by trends such as aging population, healthcare costs, and debt accumulation, rather than annual political decisions. Cuts to any of these would require politically painful choices, which previous administrations have long avoided.

The interest trap. This is the most concerning dynamic within the entire debt predicament. In 2015, the U.S. paid net interest on the debt of $223 billion; in 2020, it was $345 billion; in 2024, it is projected at $881 billion; and for FY 2026, it is expected to reach $1.039 trillion—almost tripling in just six years. Interest expenses have now become the third largest expenditure item in the federal budget, following Social Security and Medicare, surpassing defense spending. The CBO projects that by 2028, interest expenditures will exceed Medicare expenditures, and by 2048, it will become the single largest item of federal government spending—at which point the government’s spending on repaying historical debt will exceed all future investments.

The CBO predicts that over the next 30 years, U.S. government interest expenditures alone will amount to nearly $100 trillion. To put it into perspective, this figure exceeds the total of all major federal program expenditures.

The Inflation Reduction Act — the latest acceleration engine. Signed into law in 2025, the Inflation Reduction Act (IR Act) permanently enshrined tax cuts from the Trump era of 2017 and expanded tax exemptions for tips and overtime pay. The Congressional Budget Office estimates that this law will increase the fiscal deficit by $2.8 trillion over the next decade. If all temporary provisions are made permanent, the Committee for a Responsible Federal Budget estimates that the costs will climb to $4 to $5 trillion. The estimated cumulative deficit from 2026 to 2035 has been adjusted upwards to $23.1 trillion, $1.4 trillion higher than the previous year's CBO forecast.

Legacy of the pandemic. The two largest annual fiscal deficits in U.S. history occurred during the COVID-19 pandemic: $3.1 trillion for FY 2020 and nearly $2.8 trillion for FY 2021. These borrowings still remain on the balance sheet and continue to carry interest burdens at rates far above the near-zero rates at which they were issued.

Educational note: A fiscal deficit is the annual difference between government spending and revenue. National debt is the cumulative sum of annual deficits plus all interest. To illustrate simply: if your monthly expenses exceed your income by $5,000, and you cover the difference with a credit card, your monthly deficit is $5,000. Your total debt is your credit card balance—accumulating deficits each month, plus growing interest. The U.S. government situation is exactly the same, just with many more zeros behind the numbers.

Section 3 — Will America really go bankrupt?

This is the question every retail investor eventually asks, and it deserves a cautious and honest answer, rather than a simple yes or no.

The short answer is: the U.S. will not go bankrupt like a business or a family. The U.S. government issues its currency—the dollar, and theoretically can always create more dollars to pay off its debt. Historically, no country that borrows in its own currency and controls its own central bank has ever faced forced involuntary default. The only default in U.S. history occurred in 1979, and it was merely a brief default due to a technical operational mistake.

But that does not mean there are no consequences. The ability to print money brings along another risk: inflation. If the U.S. government massively increases the money supply to repay its debt, the real purchasing power of every dollar in circulation will diminish—essentially imposing a hidden tax on everyone holding dollars and dollar-denominated assets. This is precisely why the question of "Will America go bankrupt?" is far less worthy of in-depth exploration than the question of "What consequences will the current trajectory bring?"

Insights from Reinhart and Rogoff. Carmen Reinhart and Kenneth Rogoff, in their landmark study "This Time Is Different: Eight Centuries of Financial Folly," which examines over 800 years of financial crises, found that debt crises often do not arise incrementally and predictably but suddenly erupt amid a collapse of confidence. Countries that appear to be calmly managing their debt may suddenly find investors stop purchasing their bonds or demand significantly higher yields, making it impossible to service the debt. The shift from sustainability to unsustainability can happen in months, not years.

The Cato Institute framework — gradually, then suddenly. The Cato Institute uses Hemingway’s famous analogy about the way bankruptcy happens to describe the U.S. fiscal trajectory: gradually, then suddenly. Rational market participants can see the unsustainability of the U.S. fiscal trajectory from far away; they continue to buy U.S. Treasury securities—until one day they stop. That moment of change cannot be precisely predicted in advance, but the underlying conditions that lead to it are continuously accumulating.

What a true fiscal crisis would look like. A U.S. fiscal crisis would not resemble a business filing for bankruptcy but rather a sudden spike in long-term Treasury yields—investors demanding higher compensation to continue lending money. This would simultaneously elevate borrowing costs across the entire economy—mortgage loans, corporate bonds, and consumer credit would all rise. Banks, pension funds, and insurance companies holding large amounts of Treasury securities would face significant losses, potentially jeopardizing their own solvency. The U.S. House Budget Committee explicitly stated that, given the dollar's status as a global reserve currency, such a crisis "would almost certainly generate irreversible international repercussions."

The dollar's reserve currency status is both a buffer and a risk. Over half of the world’s foreign exchange reserves are held in dollars, creating structural global demand for the dollar and dollar-denominated assets (including U.S. Treasury bonds). This reserve currency status is the core reason the U.S. can maintain fiscal deficits at lower interest rates than any other country—an economists' term for this privilege is "exorbitant privilege." However, reserve currency status is not permanent; it depends on global confidence in U.S. economic strength and institutional robustness. If that confidence erodes—as the International Monetary Fund warns that the "safe haven premium" of U.S. treasuries is disappearing—this buffer will narrow.

Educational note: A reserve currency is a currency that is widely held by central banks and international institutions as a store of value and medium of global trade settlement. The dollar accounts for about 58% of global foreign exchange reserves. This means that even if neither party involved in a transaction is American, trade between countries is often settled in dollars. This creates a continuous global demand for the dollar, supporting the ability of the U.S. to finance itself at rates below market norms.

Section 4 — What this means for investors

The U.S. debt issue is not a distant theoretical risk; it has already begun to affect financial markets and investors' portfolios in tangible ways, and this impact is likely to deepen rather than diminish.

Direct correlation with rising yields. In just the second quarter of 2026, the U.S. Treasury will need to borrow $189 billion, exceeding previous expectations by $79 billion. The actual borrowing amount in the first quarter of 2026 was $577 billion, with an estimated need to borrow $671 billion in the third quarter. Such a massive and steadily growing supply of Treasury bonds entering the market can only attract enough buyers through higher yields. The 30-year U.S. Treasury yield has risen to 5.2%, the highest since 2007; the 10-year yield reached 4.687% on May 19. These are not coincidences but direct reflections of supply and demand imbalances in the bond market driven by government borrowing needs.

Crowding out effect on private investment. When the government borrows massively, it competes with businesses and households for available capital. The scale of government borrowing rises, pushing borrowing costs up for everyone—mortgage loans, corporate bonds, auto loans, and credit card rates all increase. This restrains private investment, slows economic growth, and squeezes consumer spending. Money that could have been directed towards infrastructure, research, education, and national defense is instead going to creditors in the form of historically servicing debt.

Self-reinforcing compounding dynamics. The most dangerous characteristic of the current trajectory lies in its self-reinforcement: the larger the debt, the higher the interest expenses; the higher the interest, the larger the deficits; the larger the deficits, the more borrowing is needed; the more borrowing, the higher the yields pushed up; the higher the yields, the heavier the interest burden on new debt. This cycle can maintain a facade of stability for quite a while—until a certain critical point.

Moody's downgrade and its signaling significance. In May 2025, Moody's downgraded the U.S. sovereign credit rating from Aaa to Aa1, becoming the last of the three major rating agencies to complete this downgrade. Standard & Poor's downgraded it in 2011, and Fitch followed suit in 2023. All three agencies acted in succession over 14 years, relaying a consistent message: The current fiscal trajectory is inconsistent with a top credit rating, and the gap between the government’s commitments and revenue is structural rather than cyclical.

Social Security solvency—deadline 2032. The CBO projects that the Old-Age and Survivors Insurance trust fund will run out of money by 2032, one year sooner than previously estimated. If Congress does not take action by then, according to the latest estimates by the Committee for a Responsible Federal Budget based on CBO projections, benefits for all beneficiaries will be automatically cut by approximately 28%. Currently, in just the first seven months of FY 2026, Social Security has already cost $953 billion. Any legislative fix will involve politically painful decisions that have been delayed for decades.

Section 5 — Since U.S. debt will explode, why isn’t anyone “defusing the bomb”?

Solving the U.S. debt problem is not mathematically complex, but politically it is nearly impossible. The mathematical solution is some combination of increasing revenue and cutting expenditures; the political difficulty lies in the fact that either option requires elected officials to ask voters to accept higher taxes or lower benefits—neither of which will win votes.

The dilemma on the revenue side. Federal government revenues have long lagged behind spending levels. To close the deficit gap through tax increases, income tax rates would need to be raised, the tax base expanded, or new sources of revenue created. The direction of the Inflation Reduction Act is entirely contrary to this, as it cuts taxes and expands exemptions.

The dilemma on the expenditure side. Meaningful deficit reduction must address the three major spending categories: Social Security, Medicare, and debt interest. Interest expenses cannot be directly cut as they are a legal obligation on outstanding debt. Cuts to Social Security and Medicare are extremely sensitive politically, directly affecting the largest, most actively voting group in the country—the retired and near-retired population.

Growth theory. Some economists believe that strong economic growth is the most realistic path to reduce the debt-to-GDP ratio without explicit fiscal rectification. If the economy continues to grow faster than the debt, the ratio will eventually stabilize. This is exactly what happened in the decades following World War II. Counterarguments maintain that the current debt trajectory is too steep, and interest costs are rising too quickly; growth alone is insufficient to solve the problem.

Consensus among fiscal watchdogs. The Committee for a Responsible Federal Budget estimates that achieving debt stability requires cutting approximately $10 trillion from the deficit. Currently, there is no prospect for bipartisan cooperation that even comes close to achieving this goal. CBO Director Swagel's summary judgment—"The fiscal trajectory is unsustainable"—represents the consensus of nearly every nonpartisan fiscal institution in this country.

Educational note: "Debt-to-GDP ratio" is a standard measure used by economists to assess a country's debt burden. It compares the total debt to the size of the economy rather than merely looking at absolute numbers, as sustainability hinges on whether the economy has sufficient capacity to service the debt. The U.S. debt-to-GDP ratio surpassing 100% means the debt level has exceeded the total annual output of the entire economy—this level has only occurred during World War II..

 Section 6 — Impacts on different types of investors

Equity investors: The debt crisis has given rise to a long-term interest rate environment above the near-zero interest rate era from 2009 to 2022. This structurally suppresses high-valuation growth stocks that rely on low discount rates. Benefiting sectors include finance—wider spreads enhance the yield of banks and insurers—and companies with solid current earnings and low debt ratios.

Bond investors: The U.S. debt trajectory poses mid-term headwinds for long-term Treasuries. Increased bond supply implies price pressure and rising yields over time. For investors seeking stable income, the current yield environment is the most attractive in the past fifteen years—but the risk is that yields may continue to rise. Investment-grade corporate bonds and intermediate Treasuries currently offer better risk-return profiles than long-term Treasuries.

Gold and physical asset investors: Historically, persistent fiscal deficits and concerns about currency devaluation have always been major drivers of gold demand. The significant appreciation of gold over the past two years reflects the market's assessment of the U.S. fiscal trajectory. Physical assets—real estate, commodities, inflation-protected bonds—historically provide some hedge against the purchasing power erosion caused by excessive fiscal policies.

Singapore and Asian investors: The U.S. debt crisis impacts Asia through multiple channels. Rising U.S. yields attract capital out of emerging markets, putting pressure on Asian currencies and stock markets. If a loss of confidence in U.S. fiscal management leads to a weaker dollar, the purchasing power of Asian investors holding dollar-denominated assets will deteriorate. Singapore, as an international financial center, is particularly sensitive to any turmoil in global capital markets triggered by U.S. fiscal pressures.

All investors: The most important practical implication of the current debt situation is that the era of ultra-low interest rates that prevailed from 2009 to 2022 is unlikely to return. The structural forces maintaining a high interest rate environment—stemming from the need to issue large amounts of Treasury bonds to cover ongoing deficits—are not temporary. Portfolio strategies built on the assumption of permanently low rates need to be reassessed and adjusted.

Section 7 — An honest assessment: crisis, slow burn, or manageable decline

There may be three broad scenarios for the evolution of the U.S. debt situation over the next decade.

Scenario 1: Gradual stability. Congress eventually implements meaningful fiscal reforms—achieving stability in the debt-to-GDP ratio through a combination of increased revenue and controlled expenditure. There are precedents in other countries: both the UK and Canada undertook painful but successful fiscal rectifications in the 1990s. In this scenario, long-term yields would ultimately stabilize or even decline, allowing financial markets to adjust without crisis.

Scenario 2: Slow burning. Debt continues to grow, interest rates remain high, and potential economic growth suffers due to the crowding out of private investment by government borrowing. Inflation hovers above the Federal Reserve’s target levels. The pace of living standards improvement slows. The U.S. retains its reserve currency status, but its premium narrows. Most fiscal economists consider this the most likely baseline scenario—not a crisis, but a persistent drag on economic performance and asset returns. This scenario can be said to already be in progress.

Scenario 3: Sudden collapse of confidence. At some point, enough bond market participants simultaneously conclude that the "trajectory is unsustainable," demanding significantly higher yields or simply ceasing to buy. This would trigger a sudden spike in borrowing costs, which, through rising interest expenses, would further enlarge the deficit, leading to further erosion of confidence. Reinhart and Rogoff recorded this pattern in their study spanning 800 years of sovereign debt crises. The structural advantages that the U.S. possesses—its status as a reserve currency, the size and diversity of its economy, and deep capital markets—reduce the probability of this scenario occurring compared to other countries. However, the Committee for a Responsible Federal Budget, CBO, the International Monetary Fund, and Moody's have all made it clear: If the current trajectory continues, some form of crisis is inevitable.

Honest conclusion for investors: The probability of an acute crisis erupting within the next year or two is low but not negligible; the likelihood of a slow-burn scenario over the next five to ten years is significantly higher. The corresponding implications for portfolio management—favoring current earnings over future growth, shortening the duration of fixed income, partially hedging inflation risks with physical assets, and promoting geographical diversification to reduce concentration in dollar-denominated assets—are adjustments worth implementing now, without needing to make a definitive judgment on when a more severe scenario might occur.

Section 8 — Key developments worth continuous monitoring

Updates from the Congressional Budget Office report. CBO releases budget and economic outlook reports multiple times a year, providing the most reliable nonpartisan fiscal trajectory data source. Any significant upward revisions to deficit or debt forecasts warrant significant attention as data signals.

Demand for Treasury auctions by the Treasury Department. The primary signal to gauge whether the bond market is digesting U.S. Treasury supply comfortably or is under pressure is the strength of demand for Treasury auctions—measured by bid-to-cover ratios. A low bid-to-cover ratio means the government is struggling to find enough buyers at current yields.

Predictions for the Social Security trust fund. Annual trustee reports from the trust fund provide the latest forecasts for the time until funds are exhausted. The current estimated exhaustion date for the Old-Age and Survivors Insurance (OASI) fund is 2032. If this timeline advances further, it will serve as a significant negative signal.

Trends in the 30-year Treasury yield. It has now reached 5.2%, the highest since 2007. If it remains above 5.5%, it indicates a significant upgrade in the market’s assessment of U.S. fiscal risks.

Bipartisan fiscal cooperation actions—or lack thereof. The $10 trillion deficit reduction target estimated by the Committee for a Responsible Federal Budget serves as a benchmark for measuring any legislative action. Bipartisan actions moving toward this target would be a significant positive signal; the absence of such cooperation—the current baseline state—will steadily advance the slow burn scenario.

With a debt of $39 trillion, increasing by $5 to $8 billion daily, this year, interest expenditures will first exceed $1 trillion. The debt-to-GDP ratio has surpassed 100% for the first time since World War II. The CBO states the fiscal trajectory is unsustainable. The bond market signals the same through rising yields. For investors, the question is not whether this is important. The question is: In a world where U.S. government borrowing needs are prolonged and continuously increasing, against the backdrop that the era of cheap government debt has ended, how should one adjust their holdings?

BIT (formerly Matrixport) connects directly to licensed broker-dealers for U.S. stock operations, covering all main board and ETF assets. Leveraging over seven years of institutional service and compliance license experience, BIT has successfully bridged the gap between digital assets and traditional finance, helping investors capture investment opportunities quickly.

Data Sources

Hoover Institution, U.S. National Debt and Deficits, May 2026. Fox Business, FY 2026 federal deficit expected to reach $2 trillion, May 2026. Fox Business, U.S. national debt first surpasses $39 trillion historic milestone, March 2026. Congressional Budget Office, "Budget and Economic Outlook: 2026 to 2036," February 2026. Committee for a Responsible Federal Budget, CBO February 2026 Budget and Economic Outlook, February 2026. Committee for a Responsible Federal Budget, Publicly held debt exceeds GDP, May 2026. BigGo Finance, U.S. debt levels surpass entire economy for the first time since World War II, May 2026. Independent Institute, Another stark milestone of national debt, May 2026. CBS News, U.S. debt now exceeds GDP, May 2026. Fortune Magazine, U.S. national debt officially surpasses $39 trillion, May 2026. Fortune Magazine, U.S. Treasury pays $3 billion in interest each day, May 2026. Fortune Magazine, $38 trillion national debt fiscal trajectory unsustainable says CBO, February 2026. American Action Forum, National debt interest spending: Short-term and long-term outlook, April 2026. Committee for a Responsible Federal Budget, Debt interest will exceed $1 trillion, February 2025. Peter G. Peterson Foundation, The cost of national debt, March 2026. Bipartisan Policy Center, CBO’s latest ten-year baseline fiscal outlook, February 2026. Bipartisan Policy Center, Deficit Tracking, May 2026. 24/7 Wall St., Social Security OASI fund exhaustion date 2032, March 2026. Fox Business, Social Security trust fund payment crisis by 2032, February 2026. U.S. Congress Joint Economic Committee, Monthly debt update, April 2026. Council on Foreign Relations, What happens when the U.S. hits the debt ceiling, 2023. Cato Institute, Bankruptcy: Gradually then suddenly, 2023. U.S. House Budget Committee, Consequences of Debt, 2025. Carmen Reinhart and Kenneth Rogoff, "This Time Is Different: Eight Centuries of Financial Folly." Data is as of May 2026.

 This report is for educational and informational purposes only and does not constitute investment advice and should not be construed as a recommendation to buy, sell, or hold any securities or financial instruments. All investments involve risk. Readers should conduct their own thorough research and consult a licensed financial advisor before making any investment decisions.

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