Trump’s second-term policies put US finances under growing strain as debt tops $40 trillion

U.S. President Donald Trump returned to the White House promising to put the country's finances on a firmer footing by shrinking the scope of federal government, ending costly foreign wars and boosting economic growth to rein in rising deficits.

Instead, the U.S. national debt has climbed past $40 trillion during the first 19 months of Trump's second term, while federal spending has continued to rise. The six-month-old war with Iran has also become an expensive stalemate, adding to fiscal pressures as borrowing costs increase, Reuters reported.

According to Reuters, yields on some U.S. government bonds have reached their highest levels in nearly two decades, increasing the cost of servicing the country's debt and adding to concerns about the sustainability of federal finances.


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Budget experts warn that the mounting debt could eventually force Congress and future administrations to take politically difficult measures, including tax increases or reductions in government benefits such as Social Security.

The debt crossed the $40 trillion threshold ahead of November's midterm elections, which will determine whether Republicans retain control of Congress for the second half of Trump's final presidential term. Although fiscal issues may not rank high among voters' immediate concerns, rising government borrowing can affect households through higher mortgage rates and inflation that erodes wage gains.

Debt continues to mount

Trump has contributed to higher federal borrowing during both of his presidential terms. Tax cuts enacted during his first term added an estimated $8.4 trillion to the debt, according to the Committee for a Responsible Federal Budget, Reuters reported.

His second-term tax and immigration legislation is projected by the Congressional Budget Office to add another $4.7 trillion to deficits.

The Trump administration has argued that it has taken steps to reduce government waste and spending, including cutting federal jobs and eliminating programs it considers unnecessary. Trump and congressional Republicans did manage to reduce the annual deficit in 2025, but only marginally, while the overall national debt continued to increase.

A problem spanning both parties

The deterioration in the U.S. fiscal position predates Trump and reflects policies pursued by both Republicans and Democrats over several decades.

Republican administrations under Ronald Reagan and George W. Bush oversaw tax cuts that contributed to wider deficits, while the Bush administration's wars also increased government spending. Democratic presidents Barack Obama and Joe Biden expanded spending through stimulus measures following the 2008 financial crisis and the COVID-19 pandemic.

Bill Clinton was an exception among recent Democratic presidents, recording modest budget surpluses during his second term amid strong economic growth and bipartisan reforms to entitlement programs.

Demographic changes are adding another layer of pressure. As the large baby-boom generation retires, Social Security and Medicare face growing financial strain, with payroll tax revenues increasingly insufficient to cover projected future benefits.

Reuters reported that Trump's approach has also diverged from traditional conservative calls for major entitlement reforms. Instead, his administration has pursued new safety-net initiatives, including government-backed investment accounts for newborns.

At the same time, changes to the U.S. tax structure, including higher tariffs and lower corporate tax rates, are shifting a greater share of the revenue burden toward workers and households, according to congressional budget officials.

Growth strategy faces questions

Trump and his allies have argued that faster economic growth can offset the impact of lower tax rates and higher spending by generating additional government revenue and reducing the relative burden of debt.

Reuters reported that Trump has repeatedly expressed confidence that his economic policies will generate rapid growth, arguing that stronger output could help resolve the country's fiscal challenges.

Economists and policymakers, however, have raised doubts about whether growth alone can close the widening fiscal gap. The surge in investment in artificial intelligence and major technology companies is already increasing competition for capital, potentially keeping interest rates elevated and making government borrowing more expensive.

That creates a difficult environment for Washington, as higher interest rates increase the amount the government must spend simply to service its existing debt.

Government spending cuts fall short

During his campaign, Trump pledged to combine tax cuts with significant reductions in government spending. He also tasked entrepreneur Elon Musk with leading the now-defunct Department of Government Efficiency, which was expected to identify large-scale savings.

Musk had initially targeted $2 trillion in savings, but the agency ultimately reported about $110 billion. The Government Accountability Office subsequently said the reported figure included overstated or unverifiable claims.

The gap between promised and realized savings has added to concerns that spending reductions have not been sufficient to offset the impact of tax cuts and other fiscal measures.

According to Reuters, fiscal analysts argue that tax reductions can be compatible with sustainable public finances only if they are accompanied by substantial spending cuts or other measures to contain deficits.

Tough choices ahead

The combination of rising debt, elevated borrowing costs, demographic pressures and persistent budget deficits leaves Washington with increasingly limited options.

Both major political parties have historically avoided comprehensive solutions involving taxes and entitlement programs because of their political sensitivity. But as interest costs consume a growing share of federal resources, pressure for action is likely to intensify. Reuters reported.

The challenge for Trump and Congress is therefore not simply to stimulate economic growth, but to ensure that growth is strong enough to outpace the government's expanding obligations.

Reuters reported that the U.S. entered Trump's second term with an already difficult fiscal outlook, but the administration's policies have added to those pressures rather than reversing the trend.