US National Debt Surpasses $38.4 Trillion Amid Capital Flight and Surging Defense Outlays

As 2026 begins, the fiscal stability of the United States has become a focal point of intense economic debate, with even President Donald Trump acknowledging the gravity of the situation. Recent financial data reveals a persistent and widening chasm between federal expenditures and tax revenues. By the start of 2026, the US national debt officially climbed to a staggering $38.43 trillion. This figure notably outpaced the projections set by the Congressional Joint Economic Committee, which had anticipated a trillion-dollar increase to occur closer to February 2026. This accelerated pace of borrowing suggests that the current debt accumulation is driven by factors far beyond the temporary pressures of the previous pandemic era.

This precarious fiscal landscape has triggered a noticeable exodus of capital among institutional investors, further inflaming political tensions between Washington and its allies. For instance, the Danish pension fund AkademikerPension, which oversees approximately $25 billion in assets, announced its decision to divest roughly $100 million in US Treasury bonds by the end of January 2026. The fund’s Chief Investment Officer, Anders Schelde, justified the move by citing excessive credit risks, stating that the United States no longer presents itself as a reliable borrower and that its long-term public finances appear unsustainable. In response to this potential flight of capital, President Trump used an interview with Fox Business to warn European nations of severe retaliatory measures should they continue to offload American debt. While the fund's specific divestment is relatively small in the context of the global market, it serves as a symbolic indicator of how institutional safe haven assets are being re-evaluated.

Critics and analysts suggest that the Trump administration’s fiscal strategy—centered on reindustrialization through domestic business incentives and aggressive tariffs—has solidified a troubling trajectory for national debt. Jason Furman, a former economic advisor to President Obama, noted that the US budget deficit currently exceeds 6 percent of the nation's economic output and is on track to hit 7 percent. Although the third quarter saw a robust GDP growth rate of 4.4%—the fastest since the third quarter of 2025—the underlying data raises concerns about the quality of this expansion. While consumer spending rose by 3.5%, final sales to private domestic purchasers grew by a more modest 2.9%, hinting at a reliance on potentially volatile demand factors rather than structural economic strength.

The mounting debt burden is also beginning to erode the purchasing power of average citizens, a trend highlighted by Professor Kent Smetters of the Wharton School. The US Government Accountability Office (GAO) has issued warnings regarding rising consumer prices, elevated interest rates on loans, and a decline in real wages. Despite these warnings, the US government announced a massive increase in defense spending for the 2027 fiscal year in early January 2026, setting the budget at $1.5 trillion. This represents a significant jump from the $901 billion allocated in 2026 and marks the most substantial military expenditure increase in over a decade. Simultaneously, on January 22, 2026, the Trump administration finalized the United States' withdrawal from the World Health Organization. This exit occurred despite an outstanding debt of $260 million owed to the WHO for the years 2024 and 2025, with the administration claiming that the organization’s failures in information sharing had previously cost the American economy trillions of dollars.