The National Debt, Deficit, Inflation, and Mortgages
by REI INK
As of this writing in mid-January, according to the U.S. Treasury “Debt to the Penny” dataset, which provides information about the total outstanding public debt, the National Debt is at $38.4 Trillion. “Debt to the Penny” is made up of intragovernmental holdings and debt held by the public, including securities issued by the U.S. Treasury.
The Growing National Debt History
The U.S. has carried debt since its inception. Debts incurred during the American Revolutionary War amounted to over $75 million (not adjusted for inflation) by January 1, 1791. Over the next 45 years, the debt continued to grow until 1835, when it notably shrank due to the sale of federally-owned lands and cuts to the federal budget.
Shortly thereafter, an economic depression caused the debt to again grow into the millions. The debt grew over 4,000% through the course of the American Civil War, increasing from $65 million in 1860 to $1 billion in 1863 and almost $3 billion shortly after the conclusion of the war in 1865. The debt grew steadily into the 20th century and was roughly $22 billion after the country financed its involvement in World War I.
Notable recent events triggering large spikes in the debt include the Afghanistan and Iraq Wars, the 2008 Great Recession, and the COVID-19 pandemic. From FY 2019 to FY 2021, spending increased by about 50%, largely due to the COVID-19 pandemic. Tax cuts, stimulus programs, increased government spending, and decreased tax revenue caused by widespread unemployment generally account for sharp rises in the national debt.
The Deficit
According to the Congressional Budget Office (CBO), the federal budget deficit totaled $601 billion in the first quarter of fiscal year 2026. That amount is $110 billion less than the deficit recorded during the same period last fiscal year. Revenues rose by $141 billion (or 13 percent), and outlays were $31 billion (or 2 percent) higher.
That change in the deficit was marginally influenced by the timing of outlays. Certain payments due each year on January 1, a holiday, are made in December, and the resulting increases in first quarter outlays for fiscal years 2025 and 2026 were similar. If not for those shifts, the deficit so far in fiscal year 2026 would have been $112 billion less, rather than $110 billion less, than the first-quarter shortfall last year.
According to the Bipartisan Policy Center (BPC), strong revenue growth so far this year has been driven both by higher tariff rates and robust individual income tax collections on higher wages. Spending patterns have been driven by mandatory spending, which continued to grow, as did interest payments on the national debt. This was offset by reduced disaster spending and lower spending levels at the Environmental Protection Agency and the Department of Education.
Looking ahead, Congress must address appropriations for programs that are only funded through January 2026 to avoid a second government shutdown in FY2026.
Inflation
According to the U.S. Bureau of Labor Statistics, the annual inflation rate in the U.S. remained at 2.7% in December 2025, the same as in November and in line with market expectations.
The annual core inflation rate remained unchanged at 2.6%, the lowest level since 2021, below expectations for a rise to 2.7%. On a monthly basis, the CPI edged up 0.3%, in line with forecasts, with shelter costs rising 0.4% and accounting for the largest contribution to the overall increase. The core rate came in at 0.2%, below forecasts of 0.3%.
In an article by CNBC, it stated that President Donald Trump has claimed victory over inflation.
Trump said during a speech in Davos, Switzerland, that he had “defeated” inflation and reined in consumer prices over the past year.
In an address to world leaders and others at the World Economic Forum, Trump said that the U.S. has “virtually no inflation.”
“Grocery prices, energy prices, airfares, mortgage rates, rent and car payments are all coming down, and they’re coming down fast,” Trump said in a wide-ranging speech, adding: “We’ve done a hell of a job in 12 months.”
However, federal data suggests some of those claims are overblown.
“To say the U.S. has ‘virtually no inflation’ is factually incorrect and a classic Trump overstatement,” Thomas Ryan, a North America economist at Capital Economics, wrote in an e-mail.
Core CPI, a measure that strips out energy and food prices which can be volatile, “remains uncomfortably high for policymakers at 2.6%,” Ryan wrote.
Further, Mark Zandi, chief economist at Moody’s, also told CNBC that inflation remains “uncomfortably high.”
“Inflation is especially problematic for lower and middle-income Americans, given the high inflation for many staples such as groceries, electricity, apparel, furniture, childcare, and healthcare,” Zandi said.
Mortgages and Rent
Mortgage rates, which typically follow the lead of long-term Treasury rates, are significantly lower than where they were a year ago, helped in part by Trump’s push to have Fannie Mae and Freddie Mac buy $200 billion in mortgage bonds. Just on Trump’s announcement of that plan, the average rate on the 30-year fixed-rate mortgage sank briefly below 6% in January.
The average rate for a 30-year, fixed-rate mortgage is 6.21% as of January 20, according to Mortgage News Daily, down from over 7% in January 2025.
Rent payments have also been trending lower.
In December, the national rent index fell 0.8%, ending the year with five straight months of declines, according to real estate data site Apartment List’s monthly report.
