How the $40 Trillion National Debt Affects Your Finances Today

Key Takeaways

• The U.S. national debt hit $40 trillion this week, having doubled in less than 10 years.
• Rising spending deficits and a larger national debt pose long-term risks and are currently affecting household finances in several ways.
• Higher debt comes with higher borrowing costs for all kinds of consumer loans, and may also push up inflation and hinder wage growth.

When the national debt crossed the $40 trillion mark on Wednesday, some experts used the milestone to highlight the unsustainable trajectory of the government’s finances and the long-term problem that it poses.1 But the national debt isn’t just a challenge for future generations—it’s likely affecting your finances right now, according to several analyses.

The rapidly growing national debt affects household budgets in at least two major ways.

Higher Borrowing Costs

The national debt is largely made up of bonds that the government sells to investors, who demand higher returns for taking on more risk.2 Over the last year, yields on 10- and 30-year Treasuries have risen as financial markets have grown more concerned about the outlook for inflation and the national debt.

What This Means for the Economy

High government debt affects the economy by pushing up interest rates. Addressing the problem by cutting government spending or raising taxes would have its own side effects.

That’s a problem for household finances because all kinds of loans are tied to those yields. When the national debt rises, borrowers pay more interest on credit cards, auto loans, and especially mortgages, which tend to move in sync with 10-year treasuries.

Those extra mortgage costs can add up over time. All the debt the government added between 2015 and 2025 has pushed up mortgage rates to the point where a typical family taking out a 30-year home loan in 2025 would pay an extra $2,500 a year, or $76,000 over the life of the loan, compared to if the national debt had been stable, researchers at the Yale Budget Lab think tank estimated in March.3

Inflation and Wages

The national debt accumulates when the government spends more than it collects in revenue. Accelerating deficit spending could ultimately lead to higher inflation, some economists contend.4

For every 1% increase in the ratio of the deficit to the Gross Domestic Product, typical households pay an extra $300 to $1,250 in 2024 dollars for consumer products because of higher inflation, the budget lab estimated.

For reference, the deficit was 5.8% of the GDP in 2025, up from 4.5% in 2019 before the pandemic hit.

The debt squeezes consumers on both ends because higher borrowing costs can discourage spending, hindering economic growth and stifling the job market.

“Higher interest rates for businesses may decrease long-term economic growth by making it more expensive to make productive investments such as factories and new technologies,” the Government Accountability Office said in a report on the government’s fiscal outlook in June. “Less investment could lower productivity, reduce workers’ wage growth, and contribute to rising prices for goods and services.”4

Article Sources

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1. Center for a Responsible Federal Budget. “Gross National Debt Reaches $40 Trillion.”
2. Harvard Business School. “The Dollar Is Still King—But Treasury Bonds Have Lost Their Crown.”
3. Yale Budget Lab. “The Impact of Deficits on Costs for Households.”
4. Government Accountability Office. “The Nation’s Fiscal Health.”