The U.S. gross national debt surpassed $40 trillion for the first time in August 2026, a milestone that has renewed warnings from fiscal experts about the country’s long-term economic stability. Michael A. Peterson, CEO of the Peter G. Peterson Foundation, told FOX Business that the growing debt is “stealing from our next generation” and called on policymakers to act before automatic benefit cuts hit Social Security recipients.
The $40 trillion milestone and its drivers
The debt figure, which includes both publicly held debt and intragovernmental holdings, has been climbing at an accelerating pace. The Treasury Department reported the milestone in early August, just months after the national debt reached 100% of gross domestic product for the first time since 1946. The debt-to-GDP ratio is projected to approach 200% over the next 25 years under current policies.
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Interest payments on the federal debt have become the fastest-growing line item in the budget, surpassing the defense budget for the first time. According to the Congressional Budget Office, net interest costs are expected to double over the next decade, driven by higher interest rates and the expanding debt load.
The annual budget deficit is on track to exceed $2 trillion for fiscal year 2026, which ends this month. That shortfall is fueled by mandatory spending on Social Security, Medicare, and interest, as well as discretionary spending that has not kept pace with revenue growth.
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Social Security insolvency: a ticking clock
The Social Security and Medicare Trustees’ annual report, released earlier this year, projected that the main Social Security trust fund will be depleted in 2032. At that point, if Congress does not intervene, the program would automatically cut benefits by 22% for all recipients, a scenario Peterson called “benign neglect of our retirees.”
The timing is politically significant: any senator elected in the 2026 midterms and the next president elected in 2028 would be in office when the trust fund runs dry. That makes Social Security reform a likely issue in upcoming campaigns, though lawmakers have historically avoided major entitlement changes due to political risk.
Peterson emphasized that solutions are available. The Peter G. Peterson Foundation’s Solutions Initiative has brought together seven think tanks from across the political spectrum, each producing a plan to stabilize the debt as a share of GDP. “The good news is there are many combinations, many opportunities right in front of us,” he said. “We don’t need to reinvent the wheel, we just need to have some political courage to get started.”
What the debt means for the average American
The rising debt has tangible effects on the economy and household finances. Higher federal borrowing can crowd out private investment, potentially slowing wage growth and increasing the cost of credit. Peterson noted that the debt “has a negative effect on the economy, on wages, on affordability, but also on specific governmental programs.”
For younger generations, the burden is particularly acute. Peterson argued that every dollar of deficit spending today is “saddling our kids and grandkids with $2 trillion of debt, plus all the interest on top of it.” That intergenerational transfer is a central concern for fiscal watchdogs.
While the geopolitical challenges facing the U.S. — including tensions with China, Russia, and Iran — are largely outside Washington’s control, fiscal policy is not. “The solutions are well-known,” Peterson said, pointing to tax policy changes and spending reforms that could reduce deficits over time.
As the 2026 midterm elections approach, voters are likely to hear more about the national debt and entitlement reform. Peterson remains cautiously optimistic: “I think Americans are ready for this solution because they know this isn’t sustainable, and it’s not good for their long-term future.”
