Tangle - The national debt hits $40 trillion.

Episode Date: August 25, 2026

On Tuesday, August 18, the Treasury Department announced that the debt held by the U.S. government surpassed $40 trillion, a record high. The national debt has more than doubled since 2017, and it increased from $39 trillion to $40 trillion in roughly the past five months. In response to the latest milestone, lawmakers from both parties called for new initiatives to reduce the debt. Ad-free podcasts are here!Get 20% off your first year of ad-free episodes, exclusive interviews, and deep dives with Tangle’s podcast membership!Applications are open.For the past three years, Tangle has run a college ambassador program, offering current college students the chance to serve as Tangle’s liaison on their campus, organizing speaking events, clubs, class talks, and more. Applications are now open for the fall semester program. If you (or someone you know) is interested in applying, you can do so here. We are accepting applications until Wednesday, September 2 at 11:59 PM ET. Please email Will Kaback at [e-mail] with any questions.You can read today's podcast⁠ ⁠⁠here⁠⁠⁠ and today’s “Have a nice day” story ⁠here⁠.You can subscribe to Tangle by clicking here or drop something in our tip jar by clicking here. Take the survey: How would you address the national debt and deficit? Let us know.Our Executive Editor and Founder is Isaac Saul. Our Executive Producer is Jon Lall.This podcast written by: Ari Weitzman and audio engineered and edited by Dewey Thomas. Music for the podcast was produced by Diet 75.Our newsletter is edited by Managing Editor Ari Weitzman, Senior Editor Will Kaback, Bailey Saul, Audrey Moorehead, and Carina Pacheco. Hosted on Acast. See acast.com/privacy for more information.

From executive producer Isaac Saul, this is Tangle. Good morning, good afternoon, and good evening, and welcome to the Tangle podcast. This is Tangle managing editor Ari Weitzman here with my long sleeves on, watching the missed rollback over the Adirondacks this morning, resisting the urge to get too autumnal too soon. But, man, there's nothing like a New England fall. It's still August. we're not there yet, and we shouldn't be plenty of summer ahead of us, but the apple, it yearns for the picking, the cider press, it yearns for the apple, the managing editor, he yearns for the cider, and today I'm feeling very grateful.

Indebted, even. Perhaps something we should all be feeling as our national debt reaches an auspicious milestone. In today's edition, I'm going to talk about why our debt is high and why it's not going anywhere. And then we'll give a look back at debt in the early parts of the Republic. It'll be a quick listen, but with inflation, the total time may end up getting a little bit higher. Anyway, that's enough from me. I'm sure I've already exhausted any good will with my punning and riffing. So I'm going to pass it over to Will to get us started and I'll be back for my take.

Thanks, Ari. Before we get into today's quick hits and main story, I wanted to share that applicant are open for the fall semester of Tangle's college ambassador program. This is something that we've run for the past three years, starting in September 2023, and it offers current college students the chance to essentially serve as Tangle's representative on their campus, doing things like organizing speaking events, creating clubs, doing class talks, and more. So, again, applications are open, and they will be open until Wednesday, September 2nd at

11.59 p.m. Eastern. So if you or someone you know is interested in applying, the link to the application is in the show notes of today's episode. And if you have any questions, please email me at will at reedangle.com and let me know. All right, now on to today's quick hits. Number one, the Supreme Court ruled in an unsigned emergency order that President Donald Trump can proceed with implementing part of an executive order on mail-in ballots, which would direct the U.S. Postal Service to create lists of eligible voters in each state and possibly restrict delivery of mail-in ballots in states that do not cooperate. The majority found that the states that challenged the action did so too early because the order is yet to be implemented, but it left open the possibility that

subsequent challenges to the action could succeed. The court's three Democratic-appointed justices dissented. Number two, Treasury Secretary Scott Besson announced Operation Economic Outcast, an effort to sanction countries that do business with Iran and cut Iran off from the global economy. However, Besson said these secondary sanctions would not immediately go into effect, calling the announcement a, quote, warning shot and a, quote, opportunity to remedy bad behavior. Number three, U.S. Southern Command said the military struck a boat in the Pacific ocean that was allegedly trafficking drugs, killing two people. Four, a significant wildfire near Reno, Nevada is 27% contained as of Monday, according to local

officials. The fire has injured seven people, destroyed over 30 homes, and forced approximately 63,000 people to evacuate the area. And five, an independent arbitrator ruled that the Washington Post wrongfully terminated former opinion columnist Karen Attea, over social media posts related to the assassination of conservative activist Charlie Kirk, ordering the paper to reinstate her and pay back pay. $40 trillion is a lot of money. So much, it's hard to wrap your head around it. It's more than $117,000 per person in this country.

Or if you were to take dollar bills and stack them, you'd get to the moon not once, but 10 times. So how did we get here? On Tuesday, August 18th, the Treasury Department announced that the debt held by the U.S. government surpassed $40 trillion, a record high. The national debt has more than doubled since 2017, and it increased from $39 trillion to $40 trillion in roughly the past five months. In response to the latest milestone, lawmakers from both parties called for new initiatives to reduce the debt.

For context, the national debt is the total amount. out of money that the U.S. government owes, whereas the national deficit is the net annual difference between government expenditures, what it spends, and revenues the money it takes in. In other words, the debt represents the sum of past deficits minus any annual surpluses, which the government has run only four times in the past 50 years. Economists hold differing views on the importance of the national debt, but in recent years, a growing consensus has held that both the debt and deficit will create long-term challenges for the United States if fiscal trends continue. Most federal spending goes toward individual benefit programs like Social Security and Medicare,

in addition to national defense spending and debt interest payments. Annual spending has remained high or increased in the past two decades, while Congress has also approved multi-trillion dollar additional spending packages in response to the COVID-19 pandemic and other emergencies. Simultaneously, Congress has cut individual and corporate tax rates. Beyond the $40 trillion debt milestone, economists have raised concerns about the amount of debt held by the U.S. public, which excludes debt government departments owe other departments,

in particular the Social Security Trust Fund. They've also expressed concern about the ratio of debt to gross domestic product GDP. In 2001, publicly held debt as a share of GDP was 31.5%. Today, it is nearly 100%. In response to last week's Treasury announcement, Republican fiscal hawks called for urgent action to curtail spending. Quote, America's national debt has officially crossed a line that should alarm every single American.

Representative Ralph Norman, a Republican from South Carolina, wrote on X. Quote, this is not just another number. It is a flashing warning sign that Washington's reckless, unchecked spending is putting the future of our country and generations of Americans at risk, end quote. Democrats also expressed alarm with many blaming President Donald Trump's policies for the worsening situation. Quote, for a president and a Republican Party who have railed for years against the nation's debt, it's ironic that America is deeper than ever in the red under their leadership, Senator Dick Durbin, a Democrat from Illinois, said.

Quote, from Trump's billionaire tax cuts to his war with Iran, its clear fiscal responsibility is the last thing on his mind, end quote. Treasury Secretary Scott Besson suggested the $40 trillion figure was not a cause for a unique concern. Quote, there's nothing magic about the $40 trillion number, he said, quote, we can grow our way out of that, end quote. Besson also said he thinks there is a very good chance that the deficit under the second Trump administration has peaked. Today you'll hear views from the left and right about the national debt and then managing editor. Ari We'll be right back after this quick break.

First off, a point of agreement. Writers across the political spectrum agree that the rising national debt is a problem requiring action from elected officials. Now here's what the left is saying. Many on the left call out Republican policies for exacerbating the debt. Some argue that the health of the U.S. economy is a bigger concern. Others criticize Treasury Secretary Besson's fiscal strategy. In MS Now, Steve Bannon wrote, Trump has some explaining to do.

The problem is getting worse, faster than anyone expected. As a candidate in 2024, Trump repeated his earlier promises to reduce the deficit and start paying off the debt before again delivering the opposite results. Trump has added nearly $4 trillion in debt since returning to the White House a year and a half ago. Trump and congressional Republicans are to blame. There's no great mystery here. The debt is growing quickly as a direct result of GOP policies, including last year's tax breaks for the wealthy and the war in Iran. For decades, Republican officials have expressed hysterical concerns about fiscal responsibility every time there's been a Democratic president.

The gap between what the government spends and what it takes in, GOP officials said, threatened to bankrupt the nation, crash the economy and ruin the lives of our children and grandchildren. But as this year's deficit approaches the $2 trillion mark and the debt passes the $40 trillion mark, those same Republicans are suddenly falling silent on the issue. In common dreams, Dean Baker argued the more important issue is to have a healthy economy with solid growth. I have never been a deficit hawk and I'm not about to change my religious affiliation now. But whatever we think of debt and deficits, there's one point that should be made very clear. It has been run up almost entirely due to Republican tax cuts and their inept management of the economy. Every Democratic president of the last half century has left with a deficit that was

lower, measured as a share of GDP, than the one they came in with, except Obama who left it unchanged. By contrast, every Republican president has left with a considerably higher deficit than what they inherited. Here is where the big failure is. Trump's war is leading to shortages. His tariffs have led higher prices for a wide range of products, as has his mass deportations. Perhaps most importantly, Trump's open corruption and self-dealing undermine confidence in the U.S. financial markets and business system more generally. In the past, investors could view the United States markets as relatively clean and stable. Unlike in some countries, getting your investment back didn't depend on staying in the good graces of the political leadership. Under Trump, this is no longer true.

and that's not a good recipe for a stable economy with solid growth. In MS Now, Anthony Coley said the old Scott Bessent would be calling Treasury Secretary Scott Besson's bluff. Besson is responsible for financing a government whose gross national debt just crossed $40 trillion. He entered office promoting a 3-33 plan, 3% economic growth, 3 million more barrels of oil a day, or the equivalent from other energy sources, and a federal budget deficit reduced. to 3% of gross domestic product by 2028. He is not on track to hit those goals. The nonpartisan Congressional Budget Office now estimates this year's deficit at $2.1 trillion,

about $200 billion worse than it projected in February, and about twice as high as Besson's target of 3% of GDP. America's debt problem was built over decades by both parties, but this administration's policies and choices have substantially added to it. This week's bond sell-off had many causes. Inflation fears, geopolitical turmoil, and a broader global bond sell-off all played roles. But the underlying problem is that Washington is borrowing enormous sums at increasingly expensive rates. The fiction is not that a reckoning is coming tomorrow. The fiction is the assumption that the country can indefinitely run enormous deficits,

pile trillions onto its debt, inject uncertainty into institutions investors rely on, and still expect the world to lend us on favorable terms. And now here's what the right is saying. The right is concerned about the debt, with many saying the only solution is to reduce spending. Some express cautious optimism about Bessence and Trump's plan. Others question whether the rising debt is the crisis that it's made out to be. In Fox News, Les Rubin called the national debt,

a crisis we can't ignore any longer. Today we are governed largely by professional politicians, many of whom have never signed the front of a paycheck or run a business. Their careers are spent in government, and they are focused on re-election, promising voters increasingly more, but not paying for these programs. A new wave of voices demands ever more expensive programs without a realistic plan to pay for them. Tax the rich, they say. Every serious economist who has examined the numbers knows that approach. cannot even come close to today's deficits, let alone the additional spending proposed. Reality requires growth-killing taxes on everyone if the spending continues to grow.

Limited government and financial responsibility produced the richest and strongest nation the world has ever known, delivering a standard of living that outpaced other Western countries. Do we want to follow their path of lower growth and lower living standards? Of course not. We must control spending if we want to keep growing and avoid going to go over the fiscal cliff. At the moment, that is exactly where current policy is taking us. In town hall, Dimitri Bolt said Scott Besson and President Trump have a plan. Treasury Secretary Scott Bessent said Thursday that the only way out is to grow our way out of debt. That is a seriously tall order because to reduce our debt through growth alone, the economy would

need to outpace its historical GDP growth rate by roughly two to three times year after year for decades, something that is close to impossible. The vice president said, quote, Scott Bessent, the amazing treasury secretary, he has had a very discreet plan, of course, supported by the president of the United States to get the United States to a point where our economy is growing faster than our debt, end quote. It remains unclear what the administration's plan actually entails beyond pursuing stronger economic growth. That growth is certainly welcome, but it cannot do all the work. At some point, America will have to confront its unwillingness to restrain spending or reform the entitlements programs pushing the debt ever higher.

With the Democratic Socialists of America on the rise, however, that willingness appears to be at an all-time low. In the New York Post, Charles Gasparino suggested the debt load is unlikely to cause a fiscal Armageddon. If you're worrying about a pending fiscal Armageddon over the country's debt, it's time to waste your cortisol spikes on something else. On its face, the debt situation appears pretty bad. The U.S. can't stop spending. Neither side, Democrats or Republicans seem interested in entitlement reforms.

And buyers of our debt want a higher interest or risk premium yield to be compensated for government profligacy. The higher yields suggest inflation is about to spike as well. I'm no fan of deficits, particularly ones that run more than 100% of GDP. In theory, there's only so much capital to go around. The people with the money, foreign investors, also not as a lot. the Chinese, hedge funds, U.S. pensions, they can't keep buying our debt forever. The government needs to make smarter choices, that's certain. In the meantime, though, don't panic. A $40 trillion debt is nothing to crow about.

At the end of the day, it's a figure, not a harbinger. That is it for what the left and writer's saying, so now I'm going to pass it over to Ari for his take. Thanks, Will. At Tangle, as a unit, the editorial team is, I think, pretty savvy. not to brag or anything, but we can all look at charts and add numbers together. And as a unit, to the person, we look at the charts that represent the federal budget and say, you cannot meaningfully reduce the federal deficit without reforming Social Security, Medicare, Medicaid, and defense spending. In fact, we published that line verbatim in Isaac's Friday piece about the failure of the Department of Government efficiency to meaningfully address

are recurring deficits, and thus are national debt. I'm not setting up a slight of hand in this piece. I have no surprising one hidden fact that will alchemize what I just said. It's just simply true. For fiscal year 2025, the federal budget was just north of $7 trillion or to convert to billions, $7,011 billion. Of that budget, Medicare and Medicaid, or just health spending, accounted for the largest share with 1,843 billion of appropriated spending or 26% of the federal budget. Social Security was second with $1,581 billion or 22.5%, and defense was fourth at $916 billion, or 13%. For a long time, defense spending was number three, but that changed in 2024. When interest paid to service our national debt, eclipsed it in 2025. In 2025,

Interest on the debt cost the American taxpayers $971 billion, accounting for 13.8% of all federal spending. Together, these four categories comprise 75.8% of the entire federal budget. This is a growing problem, as the debt increases or interest payments increase, which limits the amount the government can spend on essential services for each dollar that it raises. It also creates a positive feedback cycle where any additional debt will be more costly, meaning our interest rates get higher, meaning our interest payments get larger, meaning debt becomes a larger part of our spending, meaning we need to borrow more, etc., etc. This is not a problem that will just go away on its own.

If we run the Trump administration's 2025 budget back for the next 10 years, based on some very crude back-of-the-napkin math, our national debt in 2036 will be nearly $55 trillion, and interest payments will comprise a full fifth of the federal budget. There's no hidden ideological boondoggle rip out of the budget to solve this problem in one simple fell swoop. Say we reduced the entire Department of Homeland Security's budget, with all its various immigration agencies down to $0. Congratulations, you've saved just over 1% of the federal budget, acting all of the acronym of the program threatened by Doge or the Office of Manage, management and budget in the past 18 months brings you no closer.

USAID, PBS, CFPB, USPS, NASA, they all sum to well under 1%. To reduce the debt, cuts simply have to come from spending categories one, two, and four. Healthcare, Social Security, and defense. And if anyone in government were to suggest cuts to category three, which is our debt payments, they would be gently ushered out of whatever room the adults are speaking in. And not that any solutions are coming from that room anyway. For all they may bluster publicly, Democrats are unwilling to slash the military budget.

Sorry Ukraine and Taiwan, we've decided to abdicate the geopolitical stage entirely. I don't think that would play well. Meanwhile, Republicans aren't going to swallow hard and take an axe to Medicare or Social Security, at least not this era as Republicans. Instead, Democrats demand the Pentagon pass an audit, while Republicans scour the Byzantine bureaucratic ballot,

for waste, fraud, and abuse. And independents say, let's do both. As a card-carrying tangle editor, I say, let's do both. But also, it's not enough, not nearly enough. And this is not a winning political message to make, but we're not going to break through this budgetary rock wall by grinding down the mortar between the bricks. We've got to make like Andy Dufrain here,

get out of rock hammers, and chisel through that wall. And it will take us just about as long as it took him the tunnel to freedom. And in case you need to brush up on your cinema, talking about the Shawshank Redemption here in which it took Andy Dufray in 19 years to tunnel out of Shawshank Penitentiary and spoiler alert. But you should probably have seen Shawshank Redemption by now. With a functional budgetary process, 19 years, it's probably about how long it will take us to get our debt just under control, not even reduced to zero, just under control. And that is decades, decades of cooperation.

And I hear you screaming into your podcast microphone or your set or whatever about the obvious issue I've been missing for the past 700 words. I hear you. And I'll grant your points one by one. Yes, spending is only one side of the coin. Federal revenue is also a big part of the problem. As liberals are wont to argue, tax revenue is simply too low to fund current expenditures. Just consider this.

Since 2015, total federal public debt, which excludes debt that parts of the government owe to other parts, has increased from $13.1 trillion, or 72% of GDP, to $32.3 trillion this week, which is roughly 100% of GDP. During that same span, federal spending on those Big Four categories has increased from 74.1% of the budget to 77.7%. Meanwhile, the Big Four accounted for 84% of federal revenue in 2015, but 104% in 2025.

And that's worth emphasizing. Since 2023, these four categories alone have accounted for more than what the federal government has been able to raise. And yes, growth and interest rates are part of the problem, too. As conservatives are wont to argue, we don't need to raise tax rates if the amount of money taxpayers are earning is going up.

When President Bill Clinton ran four straight budget surplus, in the late 1990s. He did so with the proportions of the federal budget allocated to defense, health care, social security, and debt interest only marginally lower than they are today. In fact, for Clinton's last year in office, spending on the militaries actually higher

as a proportion of the budget. But he also oversaw a period of insane fiscal growth and basically no emergency spending. And yes, relatedly, emergency spending is an enormous part of this problem. In Clinton's famous second term of budget surpluses, the largest allocation to occur outside the normal budgetary process was the 1998 Emergency Supplemental Appropriations Act, which rolled international peacekeeping, United Nations payments, White Decay remediation, and census funding

all into one, and it cost just under $18 billion. Compare that to 2025's American Relief Act that funded an emergency response to Hurricanes Milton and Helene, which cost roughly $100,000. than $10 billion, about five times greater than that Appropriations Act did under Clinton, of course, without adjusting for inflation. Oh, and speaking of inflation, the Inflation Reduction Act allocated roughly four times the spending of the American Relief Act. And then there's COVID relief, which across President Trump and Biden was roughly

10 times the amount of the Inflation Reduction Act. These emergency spending are just a huge piece of it. And yes, to all of that. Yes, every administration since Clinton has fueled the budgetary fire by increasing spending without raising enough to pay for it and then poured gasoline on that fire with some giant emergency spending package. Yes, it's everyone's fault. And yes, President Trump is making it worse, but those factors are only making it harder, not easier to reduce the budget. We now have to underspend federal revenues, hoping that any emergency spending doesn't break the bank for years

on end. We also have to raise revenues to cover spending, but not so high as to strangle growth, also for years on end. And we have to simultaneously grow the economy without stimulating it so much that we drive inflation or raise too little in taxes and allow deficits to soar. Meanwhile, our aging population means social security and health care costs will stay high, and international threats that require a large military budget aren't going to concern themselves with our accounting problems. And that's the bad news. Here's the good news. Here's the good. news. We still have time. We're swimming in deep water, sure, but we're not drowning just yet. In a meeting I had yesterday with our video team, I mentioned to our new producer,

McKelle, that we were covering the national debt today. He asked me with the current debt to GDP ratio is. Remember, it's 100% for public debt, 125% for all government debt. He heard those numbers and nodded. Okay, not that bad. McKelle is Italian. Italy's been redlining its debt for decades, and its current ratio sits at 135%. In Japan, their ratio is over 235%. Italy and Japan, they have severe fiscal problems, but they're still definitely functional countries. We can also be functional while we're solving our problems. And we know how to do that. Sustained years of compromise between cutting spending and raising taxes is our ticket back to a debt-to-GDP P ratio under 100%.

But of course, the other bad news is that if you think we have a political ecosystem right now functional enough to commit to that, well, I don't know what to tell you. It must be your first day here. Welcome to Tangle. I'm going to send it back to Will for the rest of the podcast. We'll be right back after this quick

break. Thank you. All right. Here is a deeper look related to today's story. In the 1770s, as the Continental Congress struggled to support its military efforts in the American Revolution, it turned to France for military supplies and monetary loans. This aid was controversial even at the time. American diplomats weren't sure whether the support was a gift or a loan, and disputes over French support led to one diplomat being congressionally recalled. As fighting between the Americans and the British continued, John Adams secured additional loans from Dutch bankers. When the U.S. secured its independence in 1783, the new federal government faced its mounting debt. But the Articles of Confederation didn't give it the ability to raise the revenue needed to pay

off its loans. This created a financial crisis in the 1980s, as the U.S. defaulted on its obligations to France and sought even more loans from the Dutch. This crisis partially catalyzed the ratification of the new constitution in 1789, which finally gave the federal government the power to impose taxes to raise revenue. Even so, the government had accrued roughly $75 million in debt by January 1791. In December 1790, hoping to avoid the economic crises of the 1780s and put the U.S. on better financial footing, newly minted Treasury Secretary Alexander Hamilton presented Congress with a bold plan for a national bank modeled after the Bank of England. The new bank would be able to print money, hold public funds, collect taxes, and pay government debts. Despite Secretary

of State Thomas Jefferson's concerns, the plan passed both houses of Congress and President George Washington signed it into law in February 1791. Following the ratification of the Constitution and the creation of the bank, the U.S. was able to resume debt payments, though its debts with France wouldn't be settled until 1795. Hope you enjoyed that deeper look. Now we're going to bring it home with today's Have a Nice Day story. The Spokane-Washington area was devastated by wildfires in August, with over 10,000 acres burned and tens of thousands of residents forced to evacuate.

One local business, J.K. Boots, transformed its headquarters into a relief center for firefighters responding to the blazes. The Bootmaker provided food, drinks, showers, and space to rest and recharge, while also coordinating supply donations from other locals. Furthermore, the company gave away countless pairs of its boots, which normally sell for $575 to $700, allowing fighter fighters to trade in old or destroyed pairs for brand new ones. Quote, we just wanted to do anything we could,

Tim Cosdi, one of J.K. Boots' owners said, with this disaster hitting our hometown, when it's so close, it just feels a lot different, end quote. Good, Good, Good has this story, and we'll drop the link in today's show notes. All right, that's it for today's edition. Thanks for hanging out with us and talking about the debt

and a little bit of U.S. history. We'll be back tomorrow. Until then, have a great day. And... Peace. Our executive editor and founder is me. Isaac Saul and our executive producer is John Wall. Today's episode was edited and engineered by Dewey Thomas.

Our editorial staff is led by managing editor Ari Weitzman with senior editor Will Kovac and associate editors Audrey Moore. Morehead, Lindsay Canuth, and Bailey's song. Music for the podcast was produced by Diet 75. To run more about Tangle and to sign up for a membership, please visit our website at retangle.com.