February 21, 2023

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 $640 billion in fiscal year 2023 and rise rapidly throughout the next decade — climbing from $739 billion in 2024 to $1.4 trillion in 2033. In total, net interest payments will total nearly $10.5 trillion over the next decade. Relative to the size of the economy, interest will rise from 2.7 percent of GDP in fiscal year 2024 to 3.6 percent in 2033. 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 2030.

Net interest costs are projected to rise sharply

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The federal government already spends 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 this fiscal year, 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 2024, 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 2028, the federal government will spend more on interest than on defense.
  • In fiscal year 2031, 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.

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

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To make another comparison, in fiscal year 2024, the federal government will spend more on interest payments than the total portion of the federal budget allocated to children (based on 2022 data compiled by the Urban Institute). Over a longer period, interest will continue to outstrip other budget categories. CBO projects that interest will exceed the amount spent on Medicare in 2044 and Social Security in 2050, 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

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