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 $1,039 billion in fiscal year 2026 and rise rapidly throughout the next decade — climbing to $2.1 trillion in 2036. In total, net interest payments will total $16.2 trillion over the next decade. Relative to the size of the economy, interest costs in 2026 are projected to exceed the post-World War II high of 3.2 percent from 1991. Such costs would rise to 4.6 percent of gross domestic product (GDP) in fiscal year 2036, if current law remains the same.
The federal government already spends more on interest than on budget areas such as:
- Defense
- 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
In fact, Medicare (net of offsetting receipts) and Social Security are the only programs larger than net interest in 2026, and interest payments are projected to overtake Medicare (net of offsetting receipts) shortly after, in 2028. Thereafter, net interest would be the second largest expenditure by the federal government.
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.
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Further Reading
The U.S. Dollar Is the World’s Reserve Currency. Why Does That Matter?
The country’s unsustainable fiscal outlook threatens to diminish the dollar’s standing, which would have damaging fiscal and economic consequences for the United States.
Delaying Fiscal Reform is Costly, Annual Treasury Report Warns
The Treasury projects that debt as a percentage of GDP will grow to more than five times the size of the U.S. economy in the next 75 years.
Debt vs. Deficits: What’s the Difference?
The words debt and deficit come up frequently in debates about policy decisions. The two concepts are similar, but are often confused.