Today, Explained - Our $40,000,000,000,000 debt

Episode Date: August 27, 2026

The US debt keeps breaking records. Should we panic? This episode was produced by Kelli Wessinger, edited by Jolie Myers, fact-checked by Gabriel Dunatov, engineered by Patrick Boyd, and hosted by Sean Rameswaram. An electronic display shows the national debt in Washington, DC on August 19, 2026, after the US gross national debt surged past $40 trillion for the first time. Photo by Mandel NGAN / AFP via Getty Images. Listen to Today, Explained ad-free by becoming a Vox Member: vox.com/members. New Vox members get $20 off their membership right now. Transcript at ⁠⁠vox.com/today-explained-podcast⁠.⁠ Learn more about your ad choices. Visit podcastchoices.com/adchoices

40 trillion. A four followed by 13 zeros. The distance from the Earth to Pluto and back in feet, depending on where the Earth is and where Pluto is. Roughly the amount of water in gallons found in Lake Tahoe, 1.2 million years, but in seconds, Is any of this helping? How about this?

40 trillion is how much debt the United States has as of this month, which averages out to about $116,000 per American. On Today explained from Vox, how we got here, how to think about being here, and how to get the heck out of here. Two and five Canadians will hear the words you have cancer. That's why every step and dollar raised matters. On September 19th, join thousands in Toronto for the Princess Margaret Cancer Foundation Walk. Challenge yourself, friends, and family to walk 21 kilometers in support of life-saving research.

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Scotia Bank. You're richer than you think. This is today explained. My name's Kimberly Adams. I'm the host of Marketplace Morning Report. Okay, Kimberly Adams, we are here because you and I apparently have $40 trillion in debt to talk about. Yeah, it's a big scary number that's apparently way more serious than $39 trillion, which is also a big scary number. And this is happening under Donald Trump's watch. Is it Donald Trump's fault?

It's kind of everybody's fault. In politics, in our day-to-day lives, in the fact that this has been an issue for, decades now and nobody really wanted to deal with it, including voters. What did we, how did we get here? What did we spend $40 trillion on? Is there like some, I don't know, USA2 somewhere hiding under the earth that we don't know about? You know, it feels like there should be because our debt at this point is basically as large as our GDP, so it's effectively like our debt is another America. And what do we spend it on? Lots of things. We spend it on the day-to-day running of the federal government. We spend it on, most appropriately now, wars.

A short time ago, the United States military began major combat operations in Iran. We spend it on things like Social Security. We're also identifying shocking levels of incompetence and probable fraud in the Social Security program. Medicare. We're not going to touch it. Food programs, the social safety net, whatever of it remains. We spend it on infrastructure. The people that are opposing the ballroom are people that, in my opinion, are very disloyal to our country.

But increasingly, we're spending more and more of it on interest on our debt. And who are we borrowing said money from? Well, for the most part, we're borrowing it from ourselves. The debt that we're talking about is what you may hear in the news referred to as treasury bonds. We begin tonight with new concerns on Wall Street and in Washington about a sharp sell-off in the bond market that's pushing... This 30-year bond yield hit a 19-year high of 5.3%. And if you have a retirement account like a 401k or a 403B, you probably have treasury bonds sitting in them. The other big group that holds a lot of treasury bonds is other governments, other countries.

They use it to sort of shore up their own reserves so that if something goes wrong or if they need to trade for commodities like oil, for example, they have dollars effectively in their government accounts that they can use for that kind of stuff. And there's something amiss in the bond market. And how can we help people understand that without putting them to sleep? Let's see. Should we even get into it? Yes. So the way that Treasury bonds and bonds in general work is that there's a price on it for people giving you their money to hold on to for a long time. The longer a bond's term is, say, 10 years, 20 years, 30 years, the more interest the government has to pay for it to be worth somebody's while to let the government hold on to your money that long.

Now, typically, people are like, oh, yeah, that's totally fine. The U.S. government can keep my money for 30 years. I'm not worried that the U.S. government's going to be able to pay me back in 30 years. It's a U.S. government. No big deal. But increasingly, as our debt has gotten worse and Congress refuses to do anything about it, as we keep making, how shall we say it, interesting geopolitical choices from a policy perspective, The rest of the world and increasingly, investors here in the United States are like, is it really going to be okay in 30 years?

And so you see those bond yields, the interest, the price that people are charging the government to hold on to the money, go up and up and up. And so what's happened in the last couple of weeks? Breaking economic news now, the Dow closed down more than 700 points today as stocks reacted to the volatile bond. market. Because this is sort of the bond market's version of for whom the bell tolls. And right now, the toll it's tolling for our mortgages, our credit cards, our auto loan. And this is important because it's directly, it almost simultaneously impacts what you pay for a new auto loan, that interest rate for your credit card interest rates, and especially for your mortgage rates. That up and up started to make people really nervous, including the U.S. government, because in

addition to a kind of signaling a lack of faith in the long-term fiscal sustainability of the United States, it also increases the amount that the government has to pay to service its own debt, which effectively makes the debt worse. But it's not like we're the only country that has ever faced what could be a debt crisis, right? Think about countries like Greece, which had its own debt crisis. And feelings are running high on the streets here now, with Greece perilously close to falling into an economic abyss. We've had lots of other Western industrialized nations that have faced skyrocketing national debt, really bad deficits, and had to deal with it somehow and the countries still exist. They had to face extreme austerity measures in many cases,

really painful interventions. But that's, I think, think where the difference is. You're not really seeing any kind of political consensus that this is so bad, we are ready to make hard choices. They didn't want to do it either, but I seem to recall that with the Greek debt crisis, it was only because outside forces, the international banks that were providing the debt relief forced the austerity measures on them that these changes happen. There is incredible outrage over the new austerity measures that are part of the bailout package, part of the deal that was agreed to in order to keep Greece up and running. So do we as a country really want to get into a situation where all of the foreign holders of

our bonds start dumping them and we're forced to, I don't know, get a loan from China to bail us out? That would suck. So what are our options then? Of the options of availing, fixing this problem on our own would probably be the least painful unless you want to actually see what a debt crisis is like in real life and I personally do not but what would that require Congress actually doing something and passing legislation that would either pretty significantly increase revenues that's taxes or drastically reducing spending. When it comes to federal spending, you have a couple different types, discretionary and non-discretionary. Non-discretionary is the stuff you have to pay for. You're already obligated.

Again, Social Security, Medicare, and interest on the national debt, stuff that we have to pay. So you can't really mess with that too much yet. Then you have discretionary spending, which is the stuff that Congress sort of debates whether or not they're going to spend the money on in a given year. And that's broken into defense and non-defense discretionary spending. We cannot afford a $1.6 trillion defense budget. We just can't. In the food stamp program, snap, there was $34 million a day in waste, abuse, and fraud. But especially when we're at war, members of Congress are often very hesitant to cut funding for defense. We had a departure from the...

more military service under the Biden administration. And you know what? When you want to build things back up, it takes money to do it. So even the, air quote, discretionary defense spending is really hard to budge. So you end up having Congress fight pretty much only the remaining slice, non-defense discretionary spending. And that's everything else. Health care, education, infrastructure, national weather service, NASA. I like space. I care about NASA. all of these programs that people like, your national parks, they all live in that teeny tiny slice. And that slice is getting squeezed smaller and smaller

as that interest on the debt category gets bigger. And so what's to be done, I guess, elect braver elected officials? Hmm. How about the economists, Kimberly? Have you noticed the economists having a change of heart? Because for as long as I can remember, we were hearing, you know what, the United States can handle this. This is how the country functions.

We can have a ton of debt as long as we're servicing the debt. I feel like some economists have changed their tune. We've got debt levels and inflation that almost looks like we're in a recession, but we're not. And having this kind of debt when we've got full employment, GDP is kind of moving along just. fine and other elements of the economy seem to be looking okay. We shouldn't be carrying debt like this. This is like world war levels of debt. That has, I think, a lot of economists worried. And because economists understand the bond market a lot better than the rest of us do, I think the signals the bond market was sending about its skepticism of our long-term fiscal.

sustainability freaked out a lot of the economist. We're going to hear from one next on Today Explain. Support for the show comes from Bombas. We're talking socks, people. High quality, well-made socks to be specific. Are you looking for socks? Bombas wants to talk to you about socks. They've got a whole line of pro-level sports socks

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Apple slash learn terms apply. $1ZWWZWZWZWZWZWZWZWZWZWZWZWZWZWZWZWZWZW. Dollars. This is today. explained. Tell me this. Have you now or ever been wrong about the national debt? Yes. Who hasn't? Tell me what your position was and why you think it maybe was wrong. A lot of the economic work on the national debt involves forecasting, predicting where things are going. And, you know, nobody can really forecast things like interest rates or when there's going.

be another recession or a war or a pandemic. So these things are inherently kind of unforecastable. So nobody could answer that question. I've been right about everything, you know, honestly. But I actually feel good in the sense of intellectually honest about how I've thought about this. because when the numbers were pointing to a level of calmness about our fiscal outlook, even though lots of people had their hair on fire, I didn't go there. I was pretty adamant that there wasn't anything to be overly worried about at this point for reasons we can get into. And when the numbers changed and the outlook changed and the politics changed, I changed. My name is Jared Bernstein, and I'll give you three identifiers so you can choose.

Formerly the chair of President Biden's Council of Economic Advisors, currently a senior policy fellow at the Center for American Progress and the Stanford Institute for Economic and Policy Research. Okay. Well, let's start with why you thought it was okay to carry loads of debt in the first place, because that was your position for some time, right? Correct. So when you say loads of debt, the important thing is not just this load of debt or the stock of debt. You know, think of the debt as the water in the bathtub. And think of the flow, like every year you get a deficit or a surplus. That's the water coming into the bathtub. So if you have a large stock of debt or loads of debt, as you say, which we were carrying, what you really want to look at is what's the rate of interest. So how much, um, debt service do you have to pay to your creditors on that loads of debt, on that stock of debt? And as long as the interest rate stays pretty low and the country's ability to service its debt is manageable, there's no obvious reason to break out a sweat, even if that, even if there's a lot of water in the bathtub. As long as you're growing faster than your interest rate payments,

as long as you're not adding too much to the debt every year, underlying economic growth can allow you to service that debt without breaking a big economic sweat. And that's where we were for a bunch of years. So that was the kind of calm part. For these decades you're talking about where you believed it was okay to carry debt, to grow the debt so long as, you know, it was in conversation with interest rates and what have you. Would you say you were part of an economic consensus in this country? I would say yes, with an asterisk, being that, you know, that. And that, you're that maybe it was sort of 50-50. Okay.

You know, half of us who were watching it had hair that wasn't burning up and the other had smoke coming out of their hats. By the way, there's an interesting strain here that we shouldn't miss because it becomes more and more relevant over time. Of the Hair on Fire Group, there were two classes. One was genuinely freaked out, incorrectly in my view, and the other was a bunch of politicians who pretended to have their air on fire, but really didn't.

These were, I used to call them chicken hawks. They were budget hawks, but they didn't really want to do anything about it. And in fact, they consistently pushed in the wrong direction, which turned out to be kind of an important component of my apotheosis in this space. Okay. Now the big moment. You maintain a position on the United States federal debt for decades, and something happens at some during this Trump administration that changes your mind. Tell us about it. Well, it wasn't like

at 2.37 p.m. on a particular day, just to be clear, I saw a number of things eroding, and it wasn't just during the Trump administration. Something flipped in my head a little bit because any kind of what we call a reaction function by Congress to react to these unsustainable forecasts, looked dead to me. And then I started seeing some academic work that actually measured this and showed, lo and behold, Congress was no longer reacting

to the budget outlook. So that was part one. Part two is I started to see interest rates drift up. And if you'll recall earlier, as you said, interest rates, I think you put it, interest rates found their way into the conversation, which is a good way to put it. And we saw budget deficits that in normal times,

you know, not, when hair was not on fire times, the budget deficit, which again, that's the water flowing into the tub, right? That should be 2 to 3 percent, negative 2 to 3 percent. That's your deficit. They're 4, 5, and 6 percent. That's almost a recessionary level deficit. So you put those three things together and, you know, my head broke. Do you think this congressional inaction or indifference to the debt was somehow seated by decades of economists? like yourself, not to put you on the spot, but to put you on the spot, saying this is okay. And somewhere along the path that, you know, Congress sort of lost the plot and just forgot all the, you know, like sort of exclusions you had and said, well, that's okay. That's okay.

Well, let me flip that on you because, you know, definitely probably in the mix. I don't want to hold myself unaccountable or my colleagues. But I actually think the, other side, maybe even more to blame or equally to blame, in the sense of, because they were saying the economy is about to explode for 30 years. And it didn't. Now, it is true that those of us, well, speaking for myself, I was saying, we really ought to get our fiscal house in order, but we don't need to worry about an immediate crisis. We have time. We have time. to fix this. So I was trying to be nuanced,

but American politics doesn't do nuance, so you can blame me for that. Is the economy about to explode? No. We still have time to fix this, and the sooner we start, the better. When I talk about debt unsustainability and the potential for a debt spiral,

I'm talking about over the next decade. I'm not talking about next week. And in some ways, the good news, Sean, is that there are ways to start repairing the damage. We can't fill up the hole, but we can stop digging the hole. And there are ways to stop digging the hole that are both good politics and good policy. And it has to do with reversing a bunch of tax cuts on the upper end of the income and wealth scale. Which I don't think is a popular position in this administration.

So what do we do? Do we just wait for a different administration? Oh, well, that's the answer for almost any good thing you want to do economically. I mean, this administration, and I'm not saying this as a partisan. I mean, it's very clear that this administration has caused all kinds of economic problems. But when we talk about the debt and deficit, I've tried to be pretty balanced in this conversation. It's not just the ours. I mean, they've definitely made the biggest contribution to the unsustainable path through their

relentless tax cutting. But there are time, you know, when I was in the Obama administration, we basically made permanent 80% of the Bush tax cuts. So Republicans have been the lead flank in taking us to this unsustainable place, but too often the Democrats have not reversed those measures and, in fact, have in some cases endorsed them. And you seem to think that this is within reach, that this is just, we're just a few steps away from making what, 40 trillion look more like 30 trillion, 20 trillion, what? Well, that's an interesting

question because it's probably making 40 trillion look more like 41 or 42 rather than 44 or 45. No. But again, Sean, don't get hung up on the big round number. The idea is

what you want, I know this is a little bit of arithmetic, but not much. What you want is it's okay if your debt grows. It's just not okay if your debt grows faster than your economy. Yeah. But as long as the economy is growing faster than the debt, which used to be the case,

then that ratio is going to come down. So it's okay if the debt accumulates a little bit more. What's not okay is it just keeps spiraling and the growth rate decelerates. Okay, so let's keep it around 40. That's the takeaway. Let's, no, that's not the takeaway. Sorry. I think $40 trillion is a big distraction.

I guess I'm sort of glad it came. I'm not glad we're there, but I mean, I guess I'm glad it's a distraction because at least we're talking about it. Exactly. I think the key thing is the debt ratio, the debt relative to the economy. I think we can get back on a path where debt to GDP doesn't just keep growing in good times and bad. It stabilizes in good times, maybe even comes down a little bit in good times because the economy's growing faster. than the debt, the denominators growing faster than the numerator, if you will. I think it's plausible, but it would mean very different people, a very different composition of people in Congress

and the White House. Okay, my new takeaway is keep the debt in check. Love it. Jared used to hang out with the D's, still hangs out with the Stanford and the Center for American Progress. Kimberly, Marketplace Morning Report, check it out in the morning. I'm Sean Ramos from Kelly Wessinger made this show today. Jolie Myers edited the show today. Patrick Boyd mixed the show today with no help. Thanks for nothing, David. Gabriel Dunatov fact-checked the show today also with no help, but that's kind of normal. And this is today explained. Two and five Canadians will hear the words, you have cancer. That's why every step and dollar raised matters. On September 19th, join thousands in Toronto for the Princess Margaret Cancer Foundation walk. Challenge yourself, friends, and family to walk 21 kilometers in support of life-saving research.

Together, we can carry the fire and help create a world free from the fear of cancer. Register today at pmcfwalk.ca.ca.