US National Debt Hits $38.86 Trillion as Growth Rate Accelerates

The US national debt crossed $38.86 trillion yesterday, growing 7.3% over the past year — a pace that’s putting fresh pressure on the federal government’s borrowing costs just as interest rates remain elevated.

Here’s the uncomfortable math: At current interest rates around 4-5%, every trillion dollars of debt costs the government roughly $40-50 billion annually in interest payments. With debt growing at over $2.6 trillion per year, that’s adding more than $100 billion in new annual interest expense — money that crowds out other spending or requires even more borrowing to finance.

This creates what bond traders call a “fiscal feedback loop.” Higher debt levels mean higher interest payments, which require more borrowing, which increases debt levels further. The cycle only breaks when either growth accelerates enough to shrink the debt-to-GDP ratio, or when the government dramatically cuts spending or raises taxes. Neither looks likely in the near term.

What This Means for Your Portfolio: Many professional investors use rising debt levels as a signal to diversify away from long-term Treasury bonds, since fiscal pressure often leads to higher yields over time. Historically, periods of rapid debt accumulation have favored assets that can outpace inflation — like equities in productive companies, real estate, and commodities. Some portfolio managers also increase their allocation to international assets when US fiscal metrics deteriorate, though America’s reserve currency status complicates that trade.

Bottom Line: The debt isn’t growing because of a crisis — it’s growing during relatively good economic times. That makes the trajectory more concerning, not less, because it suggests structural spending patterns that won’t improve when the economy inevitably slows.

Source: US Treasury Fiscal Data

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