US $40 trillion debt problem becoming geopolitical: is Washington running out of room to sustain its global power?

Uriel Araujo, Anthropology PhD, is a social scientist specializing in ethnic and religious conflicts, with extensive research on geopolitical dynamics and cultural interactions.

The US national debt has surpassed $40 trillions for the first time amid fiscal pressures, the ongoing US-Israeli war with Iran and renewed inflation fears, with government borrowing on the rise.

The figure carries psychological weight, so to speak yet the real story here is the trajectory: gross federal debt reached 40.047 trillion on August 18, with about $32.3 trillion held by the public and around $7.8 trillion intragovernmental. It has more than doubled since 2017.

Six months earlier, the Congressional Budget Office had projected that gross federal debt would reach about $39.4 trillion by the end of the fiscal year. This faster-than-expected accumulation reflects, among other things, increased borrowing needs, including the fiscal effects of Middle East spending, while higher oil prices and bond yields add to inflationary and debt-service pressures. The 30-year Treasury yield hit 5.33 percent, its highest since 2007.

To be clear, the United States still issues the world’s main reserve currency, borrows in its own money and retains deep markets. No Greek-style crisis seems to be imminent yet. The problem here is what the debt constrains: interest costs are already huge while deficits stay large.

Washington must finance its Social Security, Medicare, defense increases, the Iran war, missile replenishment, industrial policy, infrastructure, tax cuts and possible further commitments in Europe and Asia. This creates a difficult equation: the US tries to sustain the world’s most expensive military and the leading reserve-currency system while fiscal room shrinks.

The military angle is what makes the debt more revealing: the ongoing munitions crisis does not necessarily mean America has suddenly grown weak - yet it shows military power has become costlier and harder to scale. The recent Council on Foreign Relations report is clear: the Iran war has drained high-end interceptors and stand-off weapons. Patriot, THAAD and Tomahawk inventories are significantly reduced - and restocking takes years.

In the same tone, CSIS calls rebuilding the missile inventory a “multiyear project” that opens a window of vulnerability in the Western Pacific.

From an American perspective, the answer would not be just throwing another $50 billion: it would require factories, supply chains, skilled labor, multiyear contracts and sustained spending over years.

A recent 22.9 billion dollar Tomahawk deal, for one thing, aims to lift production to more than 1,000 a year. Having sophisticated weapons after all is not the same as having enough for prolonged conflict.

The aircraft carrier situation points the same way: the (temporary) lack of a US carrier in the Western Pacific does not mean America “left” Asia. Alliances and bases remain. But moving the USS George Washington from Japan to relieve the Abraham Lincoln means one theater is consuming assets needed elsewhere. That is strategic overstretch: America can fight, but must increasingly choose where - to put it simply.

Human strain is also real, with a mental health problem: sailors on the Abraham Lincoln have reportedly tried suicidally to “go overboard” after record deployments. Recruitment may have improved recently, but public health, motivation and industrial capacity have simply not: it is always worth recalling that China’s shipbuilding capacity has been estimated at more than 200 times that of the US.

The obvious conclusion is that a Great Power that struggles to man ships or restock weapons will struggle to sustain multi-front high-intensity war, to put it mildly.

And then the Strategic Petroleum Reserve (SPR) adds an energy layer to this picture: it has fallen below 300 million barrels, the lowest level in over four decades.

Add to that disruptions around the Strait of Hormuz that have removed roughly 5–6 million barrels a day from global oil flows, leaving less buffer.

In this context, war raises oil prices, inflation and debt-service costs while also driving weapons depletion and costly rearmament. Those loops reinforce each other.

Meanwhile, China has reduced its holdings of US Treasuries to 633.4 billion dollars, the lowest since 2008. This is not evidence of a sudden sell-off, but it is consistent with Beijing’s longer-term diversification away from the US Treasuries.

The euro accounts for roughly 20% of global official foreign-exchange reserves, compared with about 58% for the dollar, while the Chinese renminbi remains near 2%.

De-dollarization is thus gradual: the dollar remains “number one,” but its share of reserves is declining as central banks diversify into other currencies and gold, whose purchases remain high amid geopolitical uncertainty. Gold, after all, is no one’s liability.

The euro in turn may benefit from this diversification, but it is no automatic substitute for the dollar; the Iran war has itself weighed on the euro through higher energy costs.

Meanwhile, America’s “exorbitant privilege” increasingly carries heavier costs, as military commitments, debt service and domestic spending compete for shrinking fiscal space. At some point the “warfare state” collides with the welfare state.

In any case, China still holds large dollar assets - its strategic interest arguably lies in a world where Washington can no longer turn dollar dominance into unlimited leverage. With US debt, depleted weapons stocks, stretched Pacific deployments and a diminished SPR set against China’s industrial edge, the superpower dispute today is increasingly about whether American intervention can remain financially and politically sustainable.

In other words, the 40 trillion dollar debt reveals the financial constraints underlying American power, while depleted missiles stocks expose its industrial constraints. The low SPR in turn points to an energy-security limit. And carrier shifts show the limits of force allocation. Taken together they are yet another sign of a shift from unipolar dominance toward a more constrained multipolar order.

America remains the strongest single power, yet it can no longer convert financial strength into military reach without paying a clearer price. That change should shape future US choices, given the increasing constraints on the sustainability of American primacy.