The U.S. national debt has reached $40 trillion, with a new Conference Board report warning that continued government borrowing could raise household borrowing costs and reduce future retirement benefits.

The report, released Tuesday, modeled several scenarios for the U.S. fiscal outlook, including a baseline case based on Congressional Budget Office projections, a scenario where federal deficits are cut roughly in half and a scenario where deficits rise to 9% of GDP.

The fiscal outlook comes as the U.S. government posted a record $432 billion budget deficit in July. Treasury data showed the government collected $334 billion during the month while spending $766 billion.

The Congressional Budget Office projects a $1.9 trillion federal deficit for fiscal 2026, equal to 5.8% of GDP. CBO expects debt held by the public to rise from 101% of GDP in 2026 to 120% by 2036.

Debt Could Raise Home Costs

The Conference Board modeled the impact of different fiscal paths on a family planning to purchase a $600,000 home with a 20% down payment and a 30-year fixed mortgage.

Under the baseline scenario, total payments over 30 years for a home purchased in 2031 would reach approximately $2.89 million. Under the report’s lower-deficit scenario, the total would be about $53,000 lower.

For a home purchased in 2036, the savings under the lower-deficit scenario could exceed $100,000.

Michael Peterson of the Peterson Institute told Fortune that higher government borrowing can push up interest rates, increasing household expenses through mortgages, car loans, credit cards and inflation.

The report’s findings come as borrowing costs remain elevated. The 30-year Treasury yield reached 5.323% Tuesday, while the average 30-year fixed mortgage rate rose to 6.75% from 6.69% at the end of the previous week.

Lawrence Yun, chief economist of the National Association of Realtors, said higher bond yields are directly affecting mortgage rates, while higher inflation and long-term borrowing costs could keep rates elevated.

Social Security Faces Funding Pressure

The report also examined the potential impact of Social Security and Medicare trust fund depletion on future benefits.

The Conference Board estimates that Social Security benefits could be $173 lower per month in 2032 if the trust fund faces depletion. The monthly shortfall could rise to $705 in 2033, $721 in 2034 and $754 by 2036 compared with current expectations.

Separately, the latest estimates for Social Security’s 2027 cost-of-living adjustment point to a 3.5% to 3.6% increase. The Senior Citizens League estimates a 3.6% adjustment, while AARP projects 3.5%, with the official figure due in October.

The report also said the Treasury could face a $2.7 trillion burden if it needs to backfill Social Security and Medicare spending from the general fund after the trust funds are depleted.

The concerns come as the national debt has climbed rapidly. The debt crossed $39 trillion in March and reached $40 trillion in August, with interest expense also surpassing $1 trillion.

Former U.N. Ambassador Nikki Haley separately warned that Social Security could face a funding crisis within five years as the debt surpasses $40 trillion.

Worst-Case Scenarios

The Conference Board also modeled a government default and an extreme interest-rate shock.

Under the default scenario, total payments for the hypothetical $600,000 home purchased in 2031 could exceed $3 million. Under the interest-rate shock scenario, payments could rise above $3.6 million.

The report said worsening deficits could increase the negative effects of national debt across the broader economy, making fiscal sustainability an important issue for policymakers and voters.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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