June 9, 2022

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 grow rapidly, tripling in just ten years from $399 billion in fiscal year 2022 to $1.2 trillion in 2032. In total, net interest payments will total nearly $8.1 trillion over the next decade. Relative to the size of the economy, interest will double from 1.6 percent of GDP in fiscal year 2022 to 3.3 percent in 2032, which would be the largest ratio since at least 1940 (the first year for which the Office of Management and Budget reports such data).

Net interest costs are projected to rise sharply

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In fiscal year 2022, the (CBO) anticipates that the federal government will spend more on interest than on budget areas such as veterans’ benefits, transportation, and education.

Then, over the next few years, spending on interest will surpass spending on major budget categories:

  • In fiscal year 2023, spending on interest will become greater than mandatory spending for income security programs — a category that includes programs targeted to lower-income Americans such as the Supplemental Nutrition Assistance Program; earned income, child, and other tax credits; Supplemental Security Income; unemployment compensation; family support and foster care; and child nutrition.
  • In fiscal year 2026, interest payments will surpass the combined amount that the federal government spends on major healthcare programs other than Medicare, which is comprised of Medicaid, the Children’s Health Insurance Program (CHIP), and premium tax credits and related spending.
  • In fiscal year 2029, the federal government will spend more on interest than on defense.

Spending on interest will exceed spending on a number of categories over the next decade

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To make a couple of other comparisons, in fiscal year 2026, the federal government will spend more on interest payments than the total portion of the federal budget allocated to children (based on data compiled by the Urban Institute). And in fiscal year 2027, interest payments will exceed the amount the federal government has historically spent on education, infrastructure, and research and development — combined.

Over a longer period, interest will continue to outstrip other budget categories. CBO projects that interest will exceed the amount spent on Medicare in 2046 and Social Security in 2049, at which point it will be the largest expense 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


Image credit: Photo by Getty Images

 

What Does the Debt Mean for Our Future?

We all have a responsibility to build a brighter fiscal and economic future for the next generation.

National Debt Clock

See the latest numbers and learn more about the causes of our high and rising debt.