Under Trump, deficits remain high while borrowing costs escalate
TLT•US government debt reached $40 trillion in August, and the fiscal year ended September 30 had a roughly $2 trillion deficit, 12% larger than the previous year. Rising bond yields are pushing up borrowing costs, including 30-year mortgage rates, which recently reached 7.40%.
1. Deficits remain elevated
The US recorded a roughly $2 trillion budget deficit for the fiscal year ended September 30, the largest since pandemic-era spending and 12% above the previous year's deficit. Spending exceeded receipts by about 6.2% of the economy, while analysts cited in the article put a sustainable annual deficit at around 3% given typical growth. Debt service costs reached a record $1.36 trillion.
2. Debt rivals economic output
Government debt reached $40 trillion in August, while about $32 trillion was owed to Treasury bond holders. The debt-to-GDP ratio is around 100%, a level last seen during World War II financing. Economists are split on whether the ratio is a problem, but say a US default is highly unlikely.
3. Borrowing costs rise
Rising global bond yields are increasing US borrowing costs, while analysts say growth alone may not break the cycle of higher debt, rates and borrowing. The Trump administration says economic expansion and tariff policy can ease fiscal pressure, but the Supreme Court's decision striking down many tariffs led to $145 billion in refunds. The 30-year mortgage rate recently reached 7.40%, compared with rates around 3% common in the 2010s.
