The federal government will soon hand over nearly a trillion dollars this year simply to service its mounting debt. That figure surpasses spending on national defense. It tops outlays for Medicare in some recent tallies. And it keeps climbing.
According to fresh data, net interest costs reached roughly $880 billion in fiscal 2025. They consumed a record 3.25 percent of gross domestic product. They claimed about 19 percent of all federal revenue. Fortune laid out the stark numbers on May 27. The Committee for a Responsible Federal Budget supplied the analysis.
But the situation could deteriorate further. The 30-year Treasury yield has climbed above 5.19 percent. That marks its highest level in nearly two decades. Should yields remain elevated some 55 basis points above Congressional Budget Office assumptions, interest expenses could surge to $2.5 trillion by 2036. That would equal almost 30 percent of federal revenue. Nearly triple the historical average of the past 50 years. A punishing burden.
The mechanics are straightforward. Debt held by the public has exploded. It now exceeds the size of the entire U.S. economy. Higher borrowing costs compound the problem. When the average interest rate on that debt outpaces economic growth, the trajectory turns dangerous. CRFB projects that gap could widen to 75 basis points by 2036 under current yield conditions. Debt begets more interest. Interest begets more debt. The spiral feeds on itself.
Recent Treasury auctions reflect investor unease. A recent 30-year offering drew only middling demand. Two-thirds of investors polled by Bank of America see the 30-year yield potentially breaking 6 percent within the year. Geopolitical shocks, such as disruptions in the Strait of Hormuz, have rattled energy prices and inflation expectations. Markets also weigh uncertainty around Federal Reserve leadership. Kevin Warsh, tapped by President Trump to chair the central bank, remains an unknown in the eyes of some. “It’s not so much that people have no confidence in Warsh, it’s that they’re not sure what they’re getting,” economist Eric Leeper told observers.
These bond market signals carry real consequences. Higher Treasury yields transmit directly into the broader economy. Mortgages. Auto loans. Corporate borrowing. A 55-basis-point rise in mortgage rates would add almost $200 a month to payments on a $500,000 home loan. Lifetime costs would jump by nearly $65,000. Scale that to a million-dollar mortgage and the monthly hit exceeds $350. Total extra payments near $130,000. Families and businesses feel it immediately.
Inside the federal budget the squeeze is already visible. Interest payments now exceed outlays for Medicaid, national defense, and all non-defense discretionary programs combined. They trail only Social Security. CRFB notes that under baseline projections net interest will more than double from $970 billion in fiscal 2025 to $2.1 trillion by 2036. As a share of GDP that climbs from a record 3.2 percent in 2025 to 4.6 percent. Revenue share moves from 18.5 percent to 25 percent. The nonpartisan group warns interest will explain 28 percent of all nominal spending growth over the decade and account for 120 percent of the rise in spending relative to the economy.
Peter G. Peterson Foundation tracking through the first seven months of fiscal 2026 shows cumulative net interest at $616 billion. That sits 6.4 percent above the same period a year earlier. Interest ranks as the second-largest category of federal spending, behind only Social Security. Peterson Foundation data confirm the rapid ascent. Full-year 2025 costs hit $970 billion. Projections from the Congressional Budget Office see annual interest topping $1 trillion in 2026 and reaching $16.2 trillion cumulatively over the next ten years.
Longer-term forecasts paint an even bleaker picture. The American Action Forum cited CBO projections showing interest climbing to $2.1 trillion by 2036 and $6.6 trillion by 2056. That would represent 4.6 percent of GDP in 2036 and 6.9 percent by 2056. For context, the $1 trillion projected for 2026 alone would consume 19 percent of all federal revenue collections. Every dollar raised in taxes, 19 cents would service old borrowing. It would swallow all corporate income tax revenue. More than half of payroll taxes. More than a third of individual income taxes.
History offers little comfort. Interest as a share of revenue averaged around 10 percent over the past half-century. The current 19 percent already eclipses the prior peak set in 1991. If yields stay high that share could approach 30 percent within a decade. CRFB analysts caution there is little time to lose. “With debt approaching record levels, there is little time to lose.”
Deficit reduction stands as the most direct remedy. Smaller annual borrowing would ease immediate inflationary pressure. It would reduce crowding out in capital markets and lower long-term yields. It would shrink the stock of debt on which interest accrues. Without action other priorities get crowded out. Medicare. Defense. Infrastructure. Research. By 2027 interest could surpass Medicare spending and become the second-largest program after Social Security. By the mid-2040s it could eclipse Social Security itself.
Bipartisan Policy Center monthly deficit trackers reinforce the trend. Interest outlays continue to rise even as some shorter-term rates have eased. Long-term rates remain stubbornly high. Treasury Fiscal Data show the average interest rate on the debt hovering near 3.34 percent through early 2026, up sharply from pandemic-era lows near 1.5 percent. The Joint Economic Committee reports gross federal debt above $38.9 trillion as of early May. Debt held by the public exceeds $31 trillion.
Markets have taken notice. Recent commentary on X highlights taxpayer frustration. One analyst calculated that annual interest now equates to more than $7,000 per working adult. Discussions frequently tie the burden to past spending decisions on both sides of the aisle. Yet agreement on a path forward remains elusive.
The numbers no longer allow for delay. Interest costs have already tripled since 2020 levels. They have doubled again from recent baselines. Each percentage point increase in rates adds trillions more to the 30-year debt trajectory, according to Brookings Institution analysis of CBO scenarios. Elevated rates for longer could push debt-to-GDP toward 175 percent or higher by mid-century under certain assumptions.
Lawmakers face a narrowing window. They can trim future deficits through spending restraint, revenue measures, or some combination. They can hope for faster economic growth or lower rates. But the math grows less forgiving by the month. Bond vigilantes have returned. Yields refuse to fall back to pre-pandemic norms. The interest tab, once an afterthought, now dictates budget choices.
So the pressure builds. On Capitol Hill. In the bond market. Among taxpayers who watch larger shares of revenue vanish into debt service. CRFB and others urge a serious fiscal plan. One that confronts the reality of $39 trillion in debt and the prospect of $2.5 trillion annual interest payments. Anything less risks turning today’s heavy burden into tomorrow’s crisis.