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
Interest Costs on the National Debt Are Reaching All-Time Highs
The most recent CBO projections confirm once again that America’s fiscal outlook is on an unsustainable path — increasingly driven by higher interest costs.
New Report: National Debt Outlook Gets Worse as Interest Costs Exceed $1 Trillion Annually
A new CBO report shows that the national debt outlook worsened from last year’s projections.
What’s the Difference Between the Trade Deficit and Budget Deficit?
The terms “budget deficit” and “trade deficit” can be conflated, but they are distinct measurements of important fiscal and economic concepts.