US public debt crosses $40 trillion as both parties resist spending cuts or tax hikes

The United States breached the US$40 trillion mark in total public debt this week, according to Treasury Department figures released Wednesday, adding more than US$10 trillion to the national ledger in fewer than five years.

Public debt outstanding reached US$40.05 trillion at the close of business Tuesday. The milestone comes just three years after the country crossed US$30 trillion in January 2022, underscoring the accelerating pace at which Washington is borrowing.

No political will to reverse course

Neither major party has shown appetite for the trade-offs required to slow the debt's growth. Republicans have consistently rejected tax increases that would raise revenue, while lawmakers across the aisle refuse to support cuts to Medicare, Social Security and other entitlement programmes that form the bulk of federal spending.

Treasury Secretary Scott Bessent has cited deficit reduction as a central motivation for joining the administration, calling the current pace of borrowing unprecedented outside wartime, pandemic or recession. Yet forecasts from economists, the Congressional Budget Office and Wall Street firms project little to no improvement in the deficit-to-GDP ratio over the coming years.

Market shock may be the trigger

Many analysts believe Congress will act only when forced by a disruption in financial markets. The scenario—in which rising debt service costs crowd out other spending and higher yields destabilise markets, prompting lawmakers to finally impose fiscal discipline—is sometimes referred to as a "doom loop".

The US$10 trillion increase since early 2022 reflects a combination of pandemic-era stimulus that outlasted the health emergency, rising interest payments on existing debt, and the absence of any legislative effort to narrow deficits that remain historically wide for a period of economic growth.

Source: South China Morning Post