The U.S. national debt has surged past $38 trillion, according to the U.S. Treasury Department, just two months after surpassing previous forecasts to reach $37 trillion in August. This means the federal debt rose by $1 trillion in a little over two months, which the Peter G. Peterson Foundation calculates is the fastest rate of growth outside the pandemic.
Michael A. Peterson, CEO of the nonpartisan watchdog dedicated to fiscal sustainability, said this landmark is “the latest troubling sign that lawmakers are not meeting their basic fiscal duties.” In a statement provided to Fortune, Peterson said that “if it seems like we are adding debt faster than ever, that’s because we are. We passed $37 trillion just two months ago, and the pace we’re on is twice as fast as the rate of growth since 2000.” The foundation’s analysis attributes the acceleration to a combination of deficit spending, rising interest costs, and the economic drag of the ongoing government shutdown.
Peterson emphasized that the costs of carrying this debt are mounting rapidly. Interest payments on the national debt now total roughly $1 trillion per year, the fastest-growing category in the federal budget. Over the last decade, the government spent $4 trillion on interest, and Peterson calculated that it will balloon to $14 trillion over the next 10 years. He said that money “crowds out important public and private investments in our future.”
Shutdown exacerbates fiscal burden
The partial government shutdown, now entering its third week, is compounding those challenges. Shutdowns have historically been costly, adding $4 billion to federal expenses during the 2018–2019 closure and $2 billion in 2013, according to federal estimates. Each day of stalled government operations contributes to higher short-term costs, delayed economic activity, and postponed budgetary reforms—effectively worsening the debt problem they often stem from.
Delays in fiscal decision-making also magnify long-term costs, as Treasury reports have repeatedly warned. For instance, the Treasury’s Bureau of Fiscal Service Financial Report for fiscal year 2024 included a description of an “unsustainable fiscal path” and an indication that “current policy is not sustainable.” Deficit reduction has lagged significantly behind the pace seen after previous economic crises, including the Great Recession, when Congress implemented stricter spending caps and fiscal reforms within a few years of recovery.
Debt ripples
Paying off just the interest on this debt threatens to ripple through the economy. A recent Yale Budget Lab report highlighted how ballooning federal debt exerts upward pressure on both inflation and interest rates, potentially constraining growth and lifting borrowing costs for households and businesses alike. Meanwhile, an analysis conducted by EY this year found that the national debt’s rising trajectory could lead to sustained job and income losses over time.
A complicating factor, somewhat, is the “significant” revenue being generated by President Donald Trump’s tariff regime, several analysts have noted. Apollo Global Management Chief Economist Torsten Slok said the $350 billion being generated each year was “very significant” in September. The Congressional Budget Office (CBO) found that the tariffs, as constructed in August, before an appeals court ruled many of them to be illegal, could cut deficits by $4 trillion over the next decade. The ratings agency S&P Global reaffirmed the U.S. credit rating shortly before the appeals court ruled, saying that “broad revenue buoyancy, including robust tariff income, will offset any fiscal slippage from tax cuts and spending increases.”
Still, the U.S. credit rating is no longer top-rated at any of the three major ratings agencies, which have cited both unsustainable fiscal trends and recurring political gridlock. These downgrades have had immediate consequences, placing further upward pressure on borrowing costs and raising questions about the long-term global standing of the U.S. dollar as the world’s reserve currency. Relatedly, gold has been on a historic tear for much of 2025, before slumping to its worst sell-off earlier this week. Gold is still trading above the $4,000-per-ounce mark, a more than 50% increase year-to-date.
“Adding trillion after trillion to the debt and budgeting-by-crisis is no way for a great nation like America to run its finances,” Peterson said. “Lawmakers should take advantage of the many responsible reforms available that would put our nation on a stronger path for the future.”
The Treasury Department did not respond to a request for comment.
[This report has been updated to correct a reference to the CBO’s finding in August with regard to $4 trillion in deficit reduction.]
