Why the US economy is ringing alarm bells

What with a 250th birthday, Taylor Swift's wedding and the football World Cup, Americans could be forgiven for taking their eye off the ball this summer.

But signs of economic trouble have been building. This week they hit the headlines when US national debt passed the $40tn mark, raising concerns both at home and abroad.

It took almost 200 years for America's national debt reach $1tn for the first time, says Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

That milestone back in 1981 was treated as a wake-up call. "At that time, President [Ronald] Reagan told the nation in a televised address, 'If we as a nation needed a warning, let that be it'," she said.

"Jumping to America's 250th year, we are spending more than that just on interest payments on our debt."

Hitting the $40tn milestone was expected - driven by public spending surges under both the Donald Trump and Joe Biden administrations - but it marks another line in the sand.

Ballooning costs for social programs and other spending have outstripped revenues undermined by tax cuts. Responses to crises such as the 2008 financial crisis and the Covid pandemic have led to increased borrowing.

Add to that higher interest rates in response to recent inflation shocks and the picture begins to look grim.