Renowned economist Peter Schiff has issued a stark warning regarding the trajectory of the United States’ financial health as the total federal debt has officially surged to a record $39.4 trillion. Commenting on the rising interest rates on the multi-trillion-dollar national debt, Schiff cautioned that the country is rapidly “nearing $40 trillion” in gross liabilities, a milestone that macro-analysts warn could arrive years ahead of initial projections.
A Drastic Shift From the Past
The current debt crisis marks a historic departure from previous economic cycles. The Kobeissi Letter notes that the national debt has expanded by a massive $16.3 trillion since 2020 alone, averaging a staggering monthly increase of $209 billion.
BREAKING: Total US federal debt is now up to a record $39.4 trillion, rising +$3.2 trillion over the last 12 months.
— The Kobeissi Letter (@KobeissiLetter) July 13, 2026
Since 2020, US federal debt is now up a massive +$16.3 trillion.
This marks a +$2.5 trillion average annual increase, or +$209 billion per month.
At this pace,… pic.twitter.com/yPfFW3rB6d
Schiff highlighted that the macroeconomic landscape has drastically worsened compared to prior interest rate hikes. “The yield on the 10-year Treasury is 4.6%. When it hits 5%, it will be the highest yield since July 2007,” Schiff observed, pointing out a critical vulnerability.
“However, back then the U.S. national debt was barely $9 trillion. Now it’s nearing $40 trillion, more than 4X as high. Rising interest rates are a much bigger problem now.”
The yield on the 10-year Treasury is 4.6%. When it hits 5%, it will be the highest yield since July 2007. However, back then the U.S. national debt was barely $9 trillion. Now it’s nearing $40 trillion, more than 4X as high. Rising interest rates are a much bigger problem now.
— Peter Schiff (@PeterSchiff) July 13, 2026
The Interest Expense Time Bomb
As the Federal Reserve maintains elevated baseline target rates, the cost of servicing this debt is out of control. Financial data shows that the annualized interest expense on U.S. public debt recently touched a historic $1.35 trillion over a trailing 12-month period.
According to fiscal data, monthly interest outlays hit $185 billion in June alone, effectively operating as the second-largest line item in the federal budget—just behind the Department of Health and Human Services.
Charlie Bilello of Creative Planning warns that if current trends persist, interest payments will soon outpace Social Security as the single largest federal expenditure.
The Interest Expense on US Public Debt hit $1.35 trillion over the last 12 months, another record high. If it continues to increase at the current pace it will soon be the largest line item in the Federal budget, surpassing Social Security. pic.twitter.com/kow6fAudLB
— Charlie Bilello (@charliebilello) July 13, 2026
Growth Fails to Keep Pace
While Washington policymakers previously argued that robust economic growth would mitigate the expanding fiscal gap, recent annualized Real GDP estimates have slowed significantly from 2.9% in 2023 to a projected 1.3% for the second quarter of 2026.
With borrowing expected to increase by $2 trillion this fiscal year alone, Bilello warns that the ongoing debt spiral shows “no end in sight.”
January 2025: "Don't worry about the $2 trillion deficit and the rising national debt. We are going to grow our way out of it with 5% Real GDP."
— Charlie Bilello (@charliebilello) July 13, 2026
Today: "Wait till next year." https://t.co/dZso9Y7SWN pic.twitter.com/SS1frj5UVO
How Have Markets Performed In 2026?
The S&P 500 index has advanced 9.58% year-to-date. Similarly, the Nasdaq Composite index was up 11.35%, and the Dow Jones gained 8.51% YTD.
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 and Nasdaq 100, respectively, closed lower on Monday. The SPY ended down 0.77% at $749.17, while the QQQ declined by 1.90% to $711.74.
Meanwhile, the Dow tracker, State Street SPDR Dow Jones Industrial Average ETF Trust (NYSE:DIA), closed 0.25% higher on Monday.
Read Also: Michael Burry Warns Today's AI Debt Bubble Mirrors The Dot-Com Era
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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