US national debt soars past $38 trillion even as deficit narrows

The gross national debt of the United States has surpassed a staggering $38 trillion, reaching a new, concerning milestone that underscores the nation’s accelerating fiscal imbalance. This record high, as reported by the Treasury Department, is particularly alarming due to the unprecedented speed at which the debt is accumulating, marking the fastest rise of a trillion dollars outside of the COVID-19 pandemic era.

US national debt surpasses $38 trillion

The jump from $37 trillion to over $38 trillion occurred in just a little over two months, a pace that has fiscal watchdogs sounding a serious alarm. For context, the debt has grown by hundreds of billions of dollars in a single month, a trajectory that many experts deem unsustainable.

According to Michael Peterson, chair and CEO of the Peter G. Peterson Foundation, “reaching $38 trillion in debt during a government shutdown is the latest troubling sign that lawmakers are not meeting their basic fiscal duties.”

He added, “Along with increasing debt, you get higher interest costs, which are now the fastest growing part of the budget.” Peterson also warned on the growing expense towards paying interest on the burgeoning national debt and said, “We spent $4 trillion on interest over the last decade, but will spend $14 trillion in the next ten years. Interest costs crowd out important public and private investments in our future, harming the economy for every American.”

Who pays the burgeoning US national debt?

Notably, many economists see the soaring national debt as akin to borrowing from future generations and is inflationary in nature.

“I think a lot of people want to know that their kids and grandkids are going to be in good, decent shape in the future — that they will be able to afford a house,” said Kent Smetters of the University of Pennsylvania’s Penn Wharton Budget Model, who served in President George W. Bush’s Treasury Department.

The US budget deficit fell slightly in fiscal year 2025

Notably, the US budget deficit fell $41 billion to $1.775 trillion in the fiscal year 2025 that ended in September. The lower deficit was led by $195 billion in tariff receipts, thanks to the broad-based tariffs that President Donald Trump has imposed. Also, the education spending cuts helped lower the deficit despite lower corporate tax receipts.

The US budget deficit hit a record high of $3.13 trillion in the fiscal year 2021. The surge was understandable as the economy needed support during the pandemic. The deficit came down to $2.77 trillion in the fiscal year 2022. It fell further to $1.38 trillion in the next fiscal year, and while it was much below the previous year, it was significantly higher than in pre-pandemic times, when the deficit was contained below $1 trillion. However, in the fiscal year 2024, the budget deficit increased to $1.8 trillion.

Several leading economists and fund managers have been warning about the soaring fiscal deficit and ballooning US national debt. At Berkshire Hathaway’s annual meeting earlier this year, chairman Warren Buffett warned that US debt has reached unsustainable levels.

Many fear that the fiscal path that the world’s biggest economy has been pursuing since the COVID-19 pandemic is unsustainable, and the country needs to bring down its burgeoning fiscal deficit that has surpassed its national GDP.

IMF warns on soaring US debt pile

The International Monetary Fund (IMF) projects that the US government debt burden will surpass that of traditionally high-debt European nations, namely Italy and Greece, for the first time in a century. This landmark reversal is seen by economists as a symbolic and serious warning about the long-term sustainability of American public finances.

According to the IMF, the US debt-to-GDP ratio is projected to hit 143.4% by 2035, overtaking Italy’s forecast of 137% and Greece’s around 130%. This projected increase is fueled by persistent structural deficits and rising expenditure, including soaring interest costs on the national debt, which has already crossed the 38 trillion mark in late 2025. The US is also anticipated to run the highest annual budget deficits among advanced economies, projected to remain above 7% of GDP every year until 2030.

The US lost its only top credit rating amid rising deficit

The high budget deficits and soaring debt pile have prompted credit rating agencies to cut the US sovereign credit rating. The US lost its last top credit rating in May after Moody’s cut the country’s sovereign credit rating one notch to Aa1 from Aaa. The rating agency joined its peers in slashing the US credit rating amid concerns over unsustainable US fiscal debt and the rising cost of financing the deficit.

At Berkshire Hathaway’s annual meeting earlier this year, chairman Warren Buffett warned that US debt has reached unsustainable levels.

“We are operating at a fiscal deficit now that is unsustainable over a very long period of time. We don’t know whether that means two years or 20 years, because there’s never been a country like the United States, but this is something that can’t go on forever,” said Buffett at the meeting, where, among others, he announced his retirement from the conglomerate.

Warren Buffett warns on unsustainable debt position

He added, “And it has the aspect to it that it gets uncontrollable to a certain point that essentially you just give up on it. Paul Volcker kept that from happening in the United States, but we came close. We’ve come close multiple times, and we still have very substantial inflation in the United States, but it has never been runaway yet. And that’s not something we want to try and experiment with because it feeds on itself.”

Fed chair Jerome Powell has also cautioned about the rising deficits and unsustainable fiscal position multiple times. Powell believes that politicians were taking the wrong approach by targeting discretionary spending, which he said not only contributes a small percentage of total spending but also its share in total spending has been gradually falling.

A recent warning on soaring US debt pile comes from David Kelly, the Chief Global Strategist at J.P. Morgan Asset Management, who, in a client note discussing the growing US federal debt, said, “America is ‘going broke slowly.”

“The question I am asked most frequently by investors and financial advisors is when is the federal debt going to blow up in all of our faces. My usual answer is that, while we are going broke, we are going broke slowly.” Said Kelly in his note.