What Is the National Debt Costing Us?

Programs that millions of Americans depend on and care about may be feeling a squeeze from interest costs on our high and rising national debt.

The Congressional Budget Office (CBO) projects that interest payments will total $870 billion in fiscal year 2024 and rise rapidly throughout the next decade — climbing from $951 billion in 2025 to $1.6 trillion in 2034. In total, net interest payments will total $12.4 trillion over the next decade. Relative to the size of the economy, interest will rise from 3.2 percent of gross domestic product (GDP) in fiscal year 2025 to 3.9 percent in 2034. The previous high for interest relative to GDP in the post-World War II era was 3.2 percent in 1991 — that ratio would now be exceeded in 2025.

The federal government already spends more on interest than on budget areas such as:

• Medicaid
• Federal spending on children
• Income security programs, which include programs targeted to lower-income Americans such as the Supplemental Nutrition Assistance Program; earned income, child, and other tax credits
• Veterans’ benefits

What is more, spending on interest will surpass federal outlays on major budget categories over the next few years:

• In fiscal year 2024, the federal government will spend more on interest than on defense.
• In fiscal years 2024 through 2026, interest payments will exceed the amount that the federal government spends on Medicare (net of offsetting receipts). Net Medicare spending will overtake interest payments in the following years, except for 2029.
• In fiscal year 2025, the federal government will spend more on interest than on non-defense discretionary, which includes funding for transportation, veterans, education, health, international affairs, natural resources and environment, general science and technology, general government, and more.

What is more, interest will continue to outstrip other budget categories in the long term. CBO projects that interest will once again exceed the amount spent on Medicare (net of offsetting receipts) in 2046 and Social Security in 2051, at which point interest will be the largest category in the federal budget.

Looking ahead, lawmakers should chart a more stable, sustainable path for the federal budget that would alleviate the growing interest burden and help ensure that there is room in the budget for national priorities.

Related: Interest Costs on the National Debt Set to Reach Historic Highs in the Next Decade

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