Federal taxpayers will soon spend more on interest than national defense and Medicare.
As interest rates increase and federal debt grows, the Congressional Budget Office projects spending on federal interest will eclipse spending on many other federal programs.
Net interest has been growing. The U.S. spent $223 billion on net interest in 2015. It was to $352 billion in 2021. And it hit $659 billion in 2023. In 2024, CBO projects net interest will increase 32% to a total of $870 billion, or 3.1% of Gross Domestic Product, a metric of the nation’s total economic output.
Spending on interest topped the Medicaid budget and all spending on children in 2023, according to the Committee for a Responsible Federal Budget, a nonpartisan think tank.
“We are now projected to spend more on interest payments on the debt than national defense or Medicare starting this year,” Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, told The Center Square. “In two years, we’ll be paying more than a trillion dollars annually just on interest. This goes to show that the fiscal irresponsibility over the past two decades has significant consequences today and in the future. It is long past time for Congress and the President to work together to put the national debt on a downward sustainable path.”
Interest ($870 billion) will overtake total spending on national defense ($822 billion) in 2024. Interest costs will also exceed net Medicare spending ($851 billion) and remain in line with Medicare costs in future years.
“That would make interest the second largest line item in the budget after Social Security,” according to the Committee for a Responsible Federal Budget.
The CBO projected interest payments would exceed $1 trillion a year by 2026 and grow to $1.6 trillion by 2034. Over the next decade, interest will total $12.4 trillion. To put that in context, the federal government spent a total of $6.13 trillion in fiscal year 2023.
The Peter G. Peterson Foundation put $12.4 trillion in perspective this way:
Roughly $37,100 per person.About twice what the government spent on net interest between 2000 and 2023.Nearly four times Social Security’s cumulative cash deficits in the next 10 years.About twice the cost of the federal response to COVID-19.Nearly five times the cost of the 376 U.S. weather and climate disasters that exceeded $1 billion since 1980 (adjusted for inflation).More than 25 times the need of America’s 20-year, $473 billion drinking water infrastructure
“Interest costs have more than doubled in just the past three years, rising to more than $2 billion per day this year,” Foundation President Michael Peterson said in a statement. “And by next year, we’ll spend more on interest than on defense and nearly all other national priorities.”
