America’s fiscal outlook is on an unsustainable trajectory, with federal interest costs surging at an alarming rate, says the Peter G. Peterson Foundation, which tracks budgetary and other fiscal issues facing America.
According to new data from the Congressional Budget Office, rising debt and higher interest rates have significantly increased the cost of borrowing, putting immense pressure on the federal budget.
In 2024, the U.S. government paid $881 billion in interest on the national debt, a figure that surpasses most other federal budget components.
Projections indicate that interest costs will rise to $952 billion in 2025, an 8% increase from the prior year. This follows staggering increases of 30% and 32% in each of the two years before that under the Biden Administration.
The Treasury currently pays an average of $2.6 billion per day in interest alone. Without a change in fiscal policy, this number is expected to balloon to $4.9 billion daily by 2035, the foundation predicts.
Over the next decade, total interest payments on the national debt are projected to reach an unprecedented $13.8 trillion—nearly double the inflation-adjusted total from the past two decades combined.
To put $13.8 trillion into perspective:
- It equates to approximately $40,500 per U.S. resident.
- It is nearly twice what the government spent on net interest between 2005 and 2024.
- It is over four times the projected Social Security cash deficits in the next decade.
- It is nearly five times the cost of all U.S. weather and climate disasters exceeding $1 billion since 1980 (adjusted for inflation).
- It is more than 20 times the estimated $625 billion needed to overhaul America’s drinking water infrastructure over the next 20 years.
By nearly every measure, the foundation explains, interest costs are at historic highs and are set to climb further. Net interest costs under CBO’s projections are expected to reach nearly $1.8 trillion by 2035. Relative to the economy’s size, interest payments will account for 3.2% of gross domestic product by 2026, surpassing the previous record set in 1991, and will continue rising to 4.1% by 2035.
Additionally, federal interest payments as a share of revenue are set to hit 18.4% in 2024, tying the 1991 record. By 1993, President Bill Clinton began to earnestly work down federal spending. Via executive order, Clinton issued an executive order telling each government department or agency with more than 100 employees to cut at least 4% of its workforce.
In fact, he had budget surpluses 1998–2001, the only such years to have them since 1973. The Democrats in that era were onboard with Clinton.
While the 2025 interest on debt number is expected to decline slightly in the next two years, it will resume an upward trajectory, reaching 22.2% by 2035, the Peterson Foundation says. Interest costs will also constitute 15.6% of total federal spending by 2031, surpassing the previous peak of 15.4% set in 1996.
As more federal funds are funneled toward servicing debt, the government will face increasing difficulty in addressing pressing challenges and investing in the country’s future. The need for fiscal reform is urgent—without it, mounting interest payments will continue to drive higher debt, exacerbating financial instability and limiting the nation’s ability to respond to emergencies, invest in infrastructure, and support economic growth.
See more of the charts on this interest-on-debt situation at the Peter G. Peterson Foundation.
No such thing as Doge Alaska!
We have a governor that spends just like the drunken sailor. He has never seen so much money and it needs to find a way to fly into his pockets and the friends he makes in government that do him big favors. No, Doge Alaska will never happen! Dream on!
It would be interesting to see a chart of the national debt as a percentage of GDP.
Nevermind I googled it and it was 35% in 1980 at the start of Reagan’s term, rose to 60% at the end of Bush 1, dropped to 50% at the end of Clinton, and then skyrocketed to 125% primarily due to Obama, Biden, and a cast of RINOs like Murkowski whose only goal was/is to maximize her pork victories at the expense of future generations of Americans. Trump flattened the curve a bit despite the ridiculous COVID spending.
Anybody know in days or years what a trillion seconds is?
A trillion seconds from right now….31 thousand years.
The financial system is a fraud, and the federal reserve is not federal and has no reserves.
How about we stop giving money away to countries that hate us…….
How about all working age adults be REQUIRED to have a job.
We spend a whopping 18% of our GDP servicing the debt (compare that to other outlays) and generate a trillion of new debt every 100 to 120 days. We have for a while, as both parties have captained this ship of fools (including Trump in his first term). The US Treasury is projecting for FY2025 a 2 trillion deficit. Until this is rectified inflation will be persistent. It is one price for devaluing our currency by trying to print our way to solvency (thank you awful Modern Monetary Theory).
It is 1981 all over again regarding inflation- except we do not have a manufacturing base and are saddled with insane levels of existing debt. It is going to be painful to claw our way out instead of defaulting (which has other unpleasant consequences). The newly confirmed Treasury Sec has to immediately refinance 7 trillion of old short term debt to the market. Good Luck.
I guess the “good news” is almost every nation state on the planet is over-leveraged between 100% to 250% of debt to GDP. (China is clocking in at 225% if you believe their numbers.) It is all unsustainable and the chickens are coming home to roost. In the past this often means political instability and war. As nation state currencies are devalued that is why you are seeing a strong push to precious metals and other unmanipulated currencies like bitcoin, as investors seek sanctuary- if not for returns at least to maintain.
Overall this is why so many families (other then the 1% who are above such concerns) are having so hard a time generating savings to say nothing of just keeping their head above water.
You forgot to mention brass and lead in the push for investment in precious metals. The inevitable correction will be harsh and there will be pain. But it’s going to happen.
Good point. And it is inevitable.
What all too few people realize is the Federal budget is made up of two different parts. Mandatory spending and discretionary spending. When folks talk about how we spend too much on defense, as an example, they are talking as a percentage of discretionary spending.
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The 800# gorilla in the room that everyone ignores is the mandatory spending. That is, among other things, Social Security, Medicare, and servicing the massive national debt. And, when the Fed raises rates, what do you think happens to that massive yearly cost? Yep, it goes up.
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Which leads to the question:
If the cost to service the debt goes up, but tax revenues remain the same, where does that additional money come from? That is right, from the discretionary budget. Which now means, less services from the Federal government, cuts to staff, cuts to park services, cuts to road construction, cuts to defense, etc… etc… etc…
Funny you mention national defense as a discretionary spending item when it’s actually the only constitutional necessity prescribed by the very same constitution (until the 14th amendment of course). Social security and Medicare are socialist by nature, forced upon us to participate and totally discretionary according to the original law of the land, our US constitution.
Is waste, fraud, and abuse “mandated”?
Those who can will get in on the cut; the rest will whimper and whine!