Three things to know about the $40 trillion federal debt
The U.S. federal debt has reached $40 trillion, with annual interest payments now exceeding $1 trillion. Experts warn that this high level of debt limits government flexibility and contributes to higher interest rates for consumer loans like mortgages.
Why it matters
The ballooning national debt is a major macroeconomic concern that impacts both federal policy options and the personal finances of everyday Americans.
The Treasury Department reported this week that the U.S. federal debt had reached $40 trillion , an eye-popping level of red ink. Just the annual interest on that accumulated debt now tops a trillion dollars, making it the government's second-biggest expense, behind only Social Security.
Here are three things to know about the deepening financial hole the government is in.
For years, the government has spent more money than it collects in taxes. Some of that has been driven by political choices — to wage war, cut taxes or provide a more generous social safety net during the pandemic. But much of the growth in spending happens automatically, as baby boomers age into retirement, resulting in higher costs for Social Security and Medicare.
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