Interest on the debt is the cost of borrowing money to fund past deficits. When the government runs deficits, it issues debt. Over time, it must pay interest on that debt to investors. This spending does not fund programs or services. It is the cost of prior decisions.
Scale
Total Spending: ~$970 billion (~14% of total federal spending; third largest budget category)
- Per person: ~$2,900
- Per household: ~$7,200
Interest costs are now approaching the size of major programs like defense.
Why It’s Growing
There are two main drivers:
- Higher total debt
- ~$39 trillion and rising
- Higher interest rates
- New debt is issued at higher rates than in the past
More debt × higher rates = rapidly rising interest costs.
The Core Issue
Interest is one of the fastest-growing parts of the federal budget.
Unlike most spending, it is not directly controlled year to year and it grows automatically as debt accumulates.
Why It Matters
- It does not provide services or benefits.
- It cannot easily be cut without reducing debt.
- It competes with all other priorities for budget space.
This is often described as “crowding out.”
How It Compares
- It is now larger than most domestic programs.
- It is approaching or rivaling defense spending — historically a warning sign, as economists and historians note that when interest costs rival or exceed defense, it reflects a shift from investing in current national strength to servicing past obligations, a pattern often associated with periods of fiscal strain and relative decline.
- It is on track to become one of the largest categories overall.
The Real Constraint
Every dollar spent on interest is a dollar that cannot go to Social Security, healthcare, defense, or other priorities — or must be offset by higher taxes or more borrowing.
What Drives It Long-Term
Interest costs are driven by two things: Primary deficits (spending exceeding revenue, excluding interest); and Interest rates. If deficits continue, debt grows, interest grows, and deficits grow further. This creates a compounding cycle.
The Reality
Interest is different from other spending. It has no direct constituency. It is not something policymakers actively choose each year. It reflects the accumulated effect of past policy decisions.
What It Implies
To reduce interest costs, there are only two real paths:
- Reduce deficits (slow debt growth).
- Lower interest rates (partly outside government control).
Bottom Line
Interest on the debt is now one of the largest and fastest-growing parts of the federal budget. It does not fund services—it reflects past borrowing. As debt grows, interest costs rise automatically, putting increasing pressure on the rest of the budget.