What's Happening?
In President Trump's first year back in office, the U.S. national debt increased by approximately $2.25 trillion, according to a report by the Peter G. Peterson Foundation. This surge in debt, which brought the total to $38.4 trillion as of early January
2026, has raised concerns among budget watchdogs and Wall Street about the country's fiscal sustainability. The debt growth rate was particularly rapid between August and October 2025, marking one of the fastest increases outside of the pandemic period. The report highlights that both President Trump and President Biden have overseen significant debt increases, with Trump holding the record for the highest annual debt growth during the pandemic year of 2020.
Why It's Important?
The rapid increase in national debt under President Trump has significant implications for the U.S. economy. The rising debt levels are occurring alongside increasing interest costs, which have become one of the fastest-growing expenses in the federal budget. The Congressional Budget Office reported that net interest payments on the public debt exceeded $1 trillion for the first time in fiscal year 2025. This financial strain could limit the government's ability to respond to future economic crises or emergencies. Additionally, the growing debt may affect investor confidence and lead to higher yields on Treasury securities, potentially increasing borrowing costs for the government.
What's Next?
As the national debt continues to rise, the U.S. government faces the challenge of managing its fiscal policy to prevent further economic vulnerabilities. The administration's proposed $2,000 dividend for every American, funded by tariff revenues, could further widen the deficit unless offset by other measures. Financial markets are closely monitoring the situation, with concerns that the mounting debt could become an 'Achilles heel' for the U.S. economy. The administration will need to navigate fiscal showdowns on Capitol Hill and address the structural deficits that threaten to outpace economic growth.
