US debt hits $40 trillion: Who does Washington owe and why does it matter?

What the report says

The US national debt has crossed $40 trillion for the first time, according to a Treasury Department update cited by Al Jazeera on Wednesday. The report says the milestone comes after years of heavy borrowing, spending increases and tax cuts under both Democratic and Republican administrations, with concern growing during President Donald Trump’s second term, which began in January 2025.

Al Jazeera reports that the debt has risen sharply in recent years, reaching $39 trillion in March before adding another $1 trillion in less than five months. The article cites budget experts and the Congressional Budget Office in saying the pace of growth is far faster than in earlier decades and could leave debt at 120 percent of GDP by 2036. It also notes that debt servicing now costs about $1.1 trillion a year, more than federal spending on defense.

The story explains that most US debt is owed to domestic and foreign investors, including the Federal Reserve, mutual funds, pension funds, banks and overseas creditors. It says Japan, the United Kingdom and China are among the largest foreign holders. Another share is owed within the government itself and does not affect overall finances in the same way.

Al Jazeera says the broader concern is that persistently high borrowing could raise interest costs, crowd out private investment and eventually force lawmakers into difficult choices on taxes and spending, including possible pressure on social programs.