That is Donald J. Trump, in May 2016. So why the surprise about debt worries? It was only a question of time.

First, a technical point. The headline (gross) Federal debt number is $40 trillion (as of yesterday); debt held by the public, which nets out intergovernnmental debt, is $32.3 trillion. Still, the picture is worrying.

Figure 1: Debt held by public to potential GDP (blue, left scale), CBO projection of February 2026 (light blue +, left scale), 10 year TIPS yield, % (red, right scale). Q3 for TIPS yield is quarterly average through August 19. Light orange shadig denotes Trump administrations. NBER defined peak to trough recession dates. Source: CBO, Budget and Economic Outlook, Treasury via FRED, Treasury, and author’s calculations.

While the debt to GDP projection does not look too alarming, it’s important to realize that the projection was constructed prior to the onset of the US – Iran war, and the Supreme Court decision striking down the IEEPA based tariffs. For the first ten months of the FY 2026, the Bipartisan Policy Center estimates the budget deficit was $209 bn higher than projected due to announced actions (including the debatable $39 bn for DoD expenditures associated with the war). Prorating, this adds about $250 bn to the FY 2026 deficit.

Hence, the CBO projection should be considered somewhat “overtaken by events”, while pointing in the right direction for trend debt-to-GDP. I think part of the angst is driven by the uncertainty regarding fiscal policy (well, overall economic policy formulation in this administration), especially as the Administration evidences no coherent plan for reining in fiscal policy.

Figure 2: Economic Policy Uncertainty – fiscal policy category (blue). Light orange shadig denotes Trump administrations. NBER defined peak to trough recession dates. Source: policyuncertainty.com.