WASHINGTON (AP) — The national debt surpassed a record $40 trillion on Wednesday, a staggering milestone as defense costs, social programs like Social Security and Medicare and interest on the burgeoning deficit make up an enormous share of federal spending.

The milestone figure was recorded just five months after the U.S. hit a record $39 trillion debt in March. It reached $38 trillion five months before that, in October.

The unprecedented $40 trillion figure highlights competing administration priorities, from boosting defense spending that the U.S. relies on to carry out President Donald Trump’s almost-6-month-old war in Iran to lowering the cost of gas and groceries.

Kush Desai, a White House spokesman, said the Trump administration “has been focused on slashing waste, fraud, and abuse in federal spending while accelerating economic growth to get America’s debt-to-GDP ratio trending in the right direction.”

However, experts say the exploding debt and the latest record milestone are already affecting Americans’ pocketbooks by raising borrowing costs for things like mortgages and cars, lowering wages from businesses that have less money available to invest, and creating more expensive goods and services.

“If we want to improve our living standards, today and for the next generation, now is the time for lawmakers to put our nation on a more affordable and sustainable path,” says Michael A. Peterson, CEO of the Peter G. Peterson Foundation, a think tank focused on U.S. fiscal challenges.

The debt has exploded over several presidential administrations, as the nation’s leaders spend more money than it collects in taxes. In recent memory, the multi-year COVID-19 pandemic shut down much of the U.S. economy, where the federal government borrowed heavily during President Trump’s first term and under former President Joe Biden to stabilize the economy and support a recovery.

More government spending was approved after Trump signed Republicans’ tax cut and spending legislation into law last year.

Advocates for a balanced budget also warn that the long-term trend of borrowing more and paying more in interest will force Americans to face tougher fiscal tradeoffs ahead.

“The federal debt is already raising the cost of living and choking out other spending and investment, threatening our economy and Americans’ long-term prosperity,” said Margaret Spellings, president and CEO of the Bipartisan Policy Center.

“Our current fiscal trajectory is plainly unsustainable, and that’s the best-case scenario. AI disruption, a recession, global war, or any number of other events could quickly push us over the edge from a challenge into a full-blown crisis,” Spellings said in a statement.

The U.S. is subject to a statutory debt limit, or a limit to federal borrowing, which Congress has the authority to set, adjust or abolish. The Bipartisan Policy Center estimates that the U.S. will most likely reach the $41.1 trillion debt limit sometime between late winter and mid-summer of 2027, requiring Congress to again vote on whether to raise or suspend it.

The U.S.’ fiscal position stands as the worst among other developed countries, according to recent data analysis from the Organization for Economic Co-operation and Development

SEOUL, South Korea (AP) — The South Korean and U.S. militaries confirmed Wednesday they were significantly scaling back major joint drills, days after President Donald Trump ordered the reduction in an apparent bid to reengage with North Korean leader Kim Jong Un.

Trump had ordered his Pentagon chief to “substantially reduce” the allies’ summertime Ulchi Freedom Shield exercises, just before they began Monday for an 11-day run. Trump cited what he said was a good relationship with Kim and South Korea’s refusal to support him over Iran.

South Korean officials said Trump’s surprise announcement came without prior notice, baffling many people in the Asian country and raising concerns about joint defense readiness.

South Korea’s military said Wednesday the allies agreed to adjust the duration and scale of the exercises at the request of the U.S. It said the ongoing drills would end Friday, not Aug. 27 as initially planned. It added the allies also agreed to downsize some joint field training exercises.

The Pentagon said that it was “continuing training that enhances tactical capability” but certain events have been canceled or converted to simulations. “These adjustments preserve essential readiness and training objectives. There will be no degradation to U.S. training objectives,” a Pentagon statement said.

Shortening of drills raises worries about military readiness

Many experts say Trump’s move threatens to hurt the combined U.S.-South Korean defense posture and eventually weaken their decades-long alliance.

A reduction or suspension of military drills matters because military commanders change periodically. A one-year suspension of drills would mean commanders unfamiliar with the procedures of the drills would be taking part when they resume, according to Yang Uk, an analyst at Seoul’s Asan Institute for Policy Studies.

Ulchi Freedom Shield is largely a computer-simulated command post exercise meant to hone the allies’ ability to deal with potential North Korean aggression. The two countries usually hold a set of field training exercises during the command post exercise period.

The drills and a similar springtime exercise are a central pillar of the U.S.-South Korea alliance, which dates to the 1950-53 Korean War. But it’s also a long-running source of tensions with North Korea, which has denounced the exercises as a rehearsal for an invasion and responded with provocative missile tests. Days before this month’s drills began, North Korea launched two ballistic missiles into the sea.

This month’s drills were initially supposed to be held in two phases in simulation of North Korean attacks — the first part until this Friday on defensive operations and the second part until Aug. 27 on counteroffensive operations. North Korea is extremely sensitive to counteroffensive drills, according to South Korean media.

North Korea lambasts US-South Korea drills and vows responses

North Korea hasn’t responded to Trump’s overture. But earlier Wednesday, its state news agency, KCNA, published a commentary slamming the U.S.-South Korean military drills as “frantic” and “extremely dangerous” and vowing to completely frustrate its rivals’ hostilities.

“The dangerous escalation of the war drills staged by the U.S. and its vassal forces is posing a more serious threat to the security” of North Korea, the commentary said. “Our exercise of right to self-defense will continue to completely neutralize the enemies’ military threat.”

Many experts said Kim, now emboldened by his advancing nuclear program and expanding military cooperation with Russia, won’t likely embrace Trump’s overture and return to talks anytime soon unless he’s promised bigger concessions. In response to Trump’s previous outreach, Kim suggested last year that he can only return to talks if the U.S. drops its demand for North Korean denuclearization as a precondition for diplomacy.

Trump and Kim met three times from 2018-2019 but their high-stakes diplomacy eventually fell apart over wrangling over a North Korean demand for extensive sanctions relief in return for limited denuclearization steps.

On Monday, the office of South Korean President Lee Jae Myung expressed hope that a “friendly relationship” between Trump and Kim would lead to “meaningful dialogue” to promote peace on the Korean Peninsula. Lee is a liberal who wants better ties with North Korea.

But his office’s statement drew a strong backlash from conservatives, who alleged Lee’s government was prioritizing the resumption of Kim-Trump diplomacy over security concerns caused by Trump’s move.

Trump’s move may focus on South Korea over Iran

In his social media post, Trump said the drills are not only costly but “send a signal that is totally inappropriate and hostile” to North Korea, which he said “has been unthreatening and respectful” during his time in the White House. Trump said he asked Lee if South Korea would join the U.S. in the “denuclearization” of Iran, “and they said, ‘No thanks!’”

At separate parliamentary hearings Wednesday, South Korean Foreign Minister Cho Hyun and Defense Minister Ahn Gyu-back said neither South Korean nor U.S. officials were informed of Trump’s move before his social media post.

Cho said the alliance remains strong, while Ahn said South Korean and U.S. defense officials were maintaining close consultations.

Some experts say Trump’s cut of the drills was more likely designed to apply pressure on South Korea to give him substantial support over the Iran war than to reach out to North Korea.

“Trump’s message is that if you don’t cooperate with us on Iran, we’re not cooperating with you” on the drills either, said Yang, the analyst. “It’s like he’s asking South Korea to show it’s helping him over Iran” by taking steps like sending warships or reinforcing missile defenses in some areas.

South Korean officials said South Korea and the U.S. are closely discussing practical and military contributions that South Korea can make to help restore freedom of navigation in the Strait of Hormuz.

It wasn’t the first time that the U.S. and South Korea have scaled back or canceled their drills.

In 2018, Trump abruptly announced the cancellation of a major war game with South Korea, after his first summit with Kim. Announcing the decision, Trump said suspending the “provocative” war games would “save us a tremendous amount of money.”

The U.S. and South Korea have since canceled or reduced other joint drills to support diplomacy with North Korea and cope with the COVID-19 pandemic. Experts say reducing those drills has undermined the combined South Korea-U.S. readiness.