The United States is now paying nearly $970 billion a year just to service the interest on its $38.8 trillion national debt; a figure that has nearly tripled since 2020 and already exceeds what the federal government spends on national defense or Medicaid, according to a February analysis by the Committee for a Responsible Federal Budget (CRFB).
For many Americans, the number barely registers. But budget experts warn it represents one of the most consequential; and least discussed; fiscal emergencies in the country’s history.
Why interest costs have surged so quickly
The rapid climb in borrowing costs reflects a one-two punch. First, the federal debt load ballooned by trillions of dollars in the aftermath of the lockdown in 2020. Second, interest rates climbed sharply from near-zero lows, dramatically increasing the cost of servicing that larger debt.
As a share of the economy, interest costs have doubled from 1.6% of GDP in 2021 to a record 3.2% in 2025. That shift underscores how quickly borrowing expenses have outpaced overall economic growth.
Interest now exceeds defense and Medicaid
Today, the federal government spends more on debt interest than on Medicaid or the entire national defense budget; two of the most politically charged and publicly visible categories of federal spending.
While Americans regularly debate funding levels for the military and health care, the interest line item has grown quietly in the background, consuming a larger slice of taxpayer dollars with comparatively little public scrutiny.
The $2 trillion threshold is approaching
The outlook is even more dramatic. According to the latest baseline projections from the Congressional Budget Office (CBO), net interest costs are projected to more than double again, climbing from $970 billion in fiscal year 2025 to $2.1 trillion by 2036.
That would mark an unprecedented shift in the federal budget’s structure, placing debt service at the center of long-term fiscal planning.
Debt growth and higher rates fuel the spike
Between now and 2036, debt held by the public is expected to grow by 86%, adding roughly $26 trillion. At the same time, the average interest rate on that debt is projected to rise by about half a percentage point.
Together, those forces are expected to drive interest costs up by 121%, compounding the budgetary pressure year after year.
One in four tax dollars could go to creditors
By 2036, interest payments are projected to consume one-quarter of all federal revenue, up from roughly one-fifth today and just one-tenth back in 2021.
Put another way: For every four dollars the U.S. collects in taxes, one would go entirely toward paying creditors; not roads, not veterans, not schools.
When interest surpasses Medicare
At present, interest spending sits roughly neck and neck with Medicare, one of the most popular and politically sensitive programs in the federal budget. CBO projects that by 2029, net interest costs will surpass Medicare, making it the second-largest government program after Social Security.
That milestone is less than four years away and would represent a symbolic turning point in federal spending priorities.
On track to overtake Social Security
The longer-term trajectory is even more striking. By 2047, CBO projects interest costs will exceed even Social Security spending, becoming the single largest line item in the entire federal budget.
If realized, debt service would surpass retirement income, health care for seniors, and national defense; fundamentally reshaping how federal dollars are allocated.
The consequences extend beyond accounting. As interest costs swell, they crowd out virtually every other national priority.
The CRFB projects that rising interest costs will account for 28% of all nominal spending growth over the next decade and 120% of all spending growth as a share of GDP. In practical terms, that means other programs will effectively shrink in relative size just to make room for the growing interest bill.
Six Crisis Scenarios Highlight Potential Economic Risks
The Committee for a Responsible Federal Budget outlined six potential crisis scenarios linked to unchecked debt growth. These include financial crises triggered by investor panic, inflation crises caused by monetary expansion, currency crises weakening the U.S. dollar, and default scenarios involving missed debt payments.
The group also warned about austerity crises in which policymakers would be forced to enact severe spending cuts or tax increases during economic downturns. A final scenario, known as a gradual crisis, would involve long-term economic stagnation caused by debt crowding out private investment and slowing productivity growth.
The debt’s relentless pace
The national debt currently stands at approximately $38.82 trillion as of today and is growing at roughly $6.43 billion per day. At that pace, the U.S. is projected to cross $39 trillion by around April.
The national debt is the amount of money the federal government has borrowed to cover the outstanding balance of expenses incurred over time. In a given fiscal year (FY), when spending (ex. money for roadways) exceeds revenue (ex. money from federal income tax), a budget deficit results.
To pay for this deficit, the federal government borrows money by selling marketable securities such as Treasury bonds, bills, notes, floating rate notes, and Treasury inflation-protected securities (TIPS). The national debt is the accumulation of this borrowing along with associated interest owed to the investors who purchased these securities. As the federal government experiences reoccurring deficits, which is common, the national debt grows.
The U.S. has carried debt since its inception. However, the sheer speed of accumulation adds urgency to warnings from fiscal watchdogs that the current trajectory is unsustainable.
“This Will Bite”: JPMorgan CEO Jamie Dimon Sounds Alarm
Jamie Dimon delivered a blunt reality check to Wall Street, warning that soaring government debt is a slow-burn risk that markets and policymakers are underestimating. Speaking on JPMorgan Chase’s fourth-quarter 2025 earnings call, the bank CEO said deficits in the U.S. and around the world will eventually trigger consequences that can’t be wished away.
“You can’t just keep on borrowing money endlessly,” Dimon said, reiterating a warning he has made repeatedly as U.S. debt climbs toward $38 trillion. While the timing of a reckoning is uncertain, he stressed that the math eventually forces hard choices on governments and markets.
J.P. Morgan Asset Management’s chief global strategist, David Kelly, issued a stark reminder this week: America isn’t going broke overnight; but it is going broke.
In his latest episode of Notes on the Week Ahead, titled “Going Broke Slowly: The Investment Implications of Still-Rising Federal Debt,” Kelly argues that investors and policymakers have grown numb to an unsustainable fiscal path.
Calls for a credible deficit reduction plan
The federal government needs to borrow money to pay its bills when its ongoing spending activities and investments cannot be funded by federal revenues alone.
Fiscal policy experts argue that a credible deficit reduction plan remains the only viable off-ramp; one that would put debt on a more sustainable path, ease pressure on interest rates, and prevent the interest bill from consuming an ever-larger share of the budget.
So far, however, Washington has not produced a comprehensive plan capable of materially altering the nation’s long-term fiscal course.
With a divided Congress and midterms approaching; the national debt is no longer in focus.
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14 essential strategies to maximize your Social Security and avoid costly mistakes
Social Security is a vital lifeline for many seniors, providing crucial income support during retirement. With inflation at its highest in four decades, Social Security’s inflation-adjusted benefits offer protection against rising costs.
Rising interest rates have disrupted many retirement portfolios, causing bond fund values to plummet. In this volatile financial landscape, Social Security can stabilize a typical stock-bond retirement portfolio. By implementing smart strategies, retirees can maximize their Social Security benefits and ensure a more secure financial future.
14 Essential Strategies to Maximize Your Social Security and Avoid Costly Mistakes
11 reasons you should claim Social Security early
Deciding when to claim Social Security is often about maximizing your benefit. Financial planners usually advise delaying your claim for as long as possible to secure the highest monthly payment. Your benefit is based on your lifetime earnings, with a full payout available at your full retirement age (FRA), which is currently between 66 and 67 depending on your birth year. Claiming before FRA results in a permanent reduction in your monthly benefit, while waiting beyond FRA leads to a permanent increase. However, the decision isn’t solely about maximizing the monthly check. Personal factors such as health, family circumstances, and financial needs can play a significant role in determining the right time to claim.
11 Reasons You Should Claim Social Security Early
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John Dealbreuin came from a third world country to the US with only $1,000 not knowing anyone; guided by an immigrant dream. In 12 years, he achieved his retirement number.
He started Financial Freedom Countdown to help everyone think differently about their financial challenges and live their best lives. John resides in the San Francisco Bay Area enjoying nature trails and weight training.
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