Our Best Stuff on Crossing the $40 Trillion Debt Threshold
The Dispatch · RC · trust 38/100
Unlocked Dispatch Weekly Our Best Stuff on Crossing the $40 Trillion Debt Threshold Plus, saying farewell to Dolly Parton. Rachael Larimore / August 29, 2026 Loading An electronic display shows the national debt in Washington, D.C., on August 19, 2026. (Photo by Mandel NGAN / AFP via Getty Images) An electronic display shows the national debt in Washington, D.C., on August 19, 2026. (Photo by Mandel NGAN / AFP via Getty Images) = 3 && ageInMonths 3 months old . Some information may be outdated.'; } else if (ageInMonths = 6 && ageInMonths 6 months old . Some information may be outdated.'; } else if (ageInMonths = 12 && ageInMonths 1 year old . Some information may be outdated.'; } else if (ageInMonths = 12) { const ageInYears = Math.floor(ageInMonths / 12); this.message = `This post is more than ${ageInYears} ${ageInYears === 1 ? 'year' : 'years'} old . Some information may be outdated.`; } } }" { this.tooltipOpen = false; }, 200); } }" class="relative" Audio Turn any article into a podcast. Upgrade now to start listening.
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Hello and happy Saturday. The U.S. has crossed a troubling threshold—our national debt now stands at $40 trillion. That’s enough money to buy about 70 percent of all homes in the United States. If that sounds like too much dusting and vacuuming, one could instead buy the 10 biggest companies in the U.S.—Nvidia, Apple, Amazon, Alphabet (Google), Microsoft, chipmaker Broadcom, Meta, SpaceX, Tesla, and Eli Lilly—and have almost $12 trillion left over.
To look at it another way, that $40 trillion works out to roughly $297,000 worth of debt for every household in the United States. And it comes out to between seven and eight years’ worth of tax revenue collected by the IRS.
How did we get here? Kevin Williamson offered up an excellent history-slash-explanation on The Dispatch Podcast . He points out that tax revenues as a percentage of GDP have remained steady since World War II—at about 15 percent of GDP—but how we’ve chosen to spend that money has changed. Back then it was 80 percent on defense and 20 percent on everything else. Now interest on the debt alone accounts for almost 20 percent, defense spending is another 20 percent, and the rest goes mostly to entitlement programs. He also explains that the high interest rates we’ve seen in recent years are part of the problem:
One of the reasons the interest rates have gone up has to do with overall market conditions, but another reason they’ve gone up has to do with the size of the debt itself. As we get more and more debt, we have to compete more against lenders to get that money, and also the less sustainable our situation looks. And so lenders want higher interest rates to make up for that risk.
Kevin’s comments hint at the interplay between the debt and interest rates; contributing writer Jessica Reidl goes a little deeper on the problem. Get ready for a debt-interest rate spiral, she warns . Here’s what that looks like:
Structural deficits and elevated rates keep federal debt climbing. Financing that debt requires the government to borrow heavily every year, which pushes rates up further. Higher interest costs swell the debt, forcing still more borrowing and still higher interest rates. Eventually financial markets recognize that a spiral is underway and, fearing default or monetization, demand even higher rates to compensate for the risk. At that point the government is borrowing destabilizing sums at punishing rates simply to cover the interest on its earlier borrowing.
Such spirals have happened elsewhere, from Greece’s cascade of bailouts to Argentina’s serial defaults to Sri Lanka’s 2022 collapse . Sure, the United States is not Greece and is unlikely to experience these scenarios in full. Yet even the tools meant to avert them inflict real economic damage. The rosiest outcome is that, as rates climb and deficits approach 10 percent of GDP , lawmakers finally heed the bond market and enact fiscal reforms to slow borrowing.
Riedl also wrote about one measure that Treasury Secretary Scott Bessent has taken—announcing that the Treasury would buy back some longer-term bonds “to assure investors that they can safely buy long-term bonds at modest interest rates because the Treasury stands ready to intervene on behalf of their confidence,” as she explained. But that announcement hasn’t exactly moved markets. For an in-depth look at Bessent’s buy-back plan, check out Monday’s Morning Dispatch .
If only there were a politician with some ideas about how to tackle this problem. Someone like, say, former Speaker of the House Paul Ryan. Way back in 2011, Ryan laid out a serious proposal for entitlement reform , which he dubbed The Path to Prosperity. The response from the left was to accuse him of trying to “throw Granny off a cliff.” Since Ryan left Congress in 2019, the national debt has doubled.
Ryan is no longer a lawmaker, but he hasn’t given up on fiscal conservatism. And he’s even still a little optimistic. Michael Warren interviewed Ryan for our new newsletter Next Right (sign up here !), and they discussed the debt problem. Mike writes :
The problem infecting our politics, Ryan said repeatedly during our 40-minute conversation, is populism, which in its various iterations offers seemingly easy and cheap fixes to problems that require tough choices and sacrifice. That irritable gesture continues to dominate both the Republican Party and, via its current love affair (or hostage situation—take your pick) with the Democratic Socialists of America, the Democratic Party. Ryan wouldn’t criticize anyone by name, but he expressed no solidarity or common cause with the populists in his own party. He maintains that the reforms of Social Security and Medicare he pushed while he was chairman of the House Budget Committee during the Obama administration were not only a necessary…
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