America has had gigantic budget deficits and debt that have been dangerous and ballooning for years, yet it’s only recently that they’re stirring alarm among voters in a big way. In the spring of 2025, a poll conducted by the non-partisan Peterson Foundation found that 76% of all voters, including 73% of Democrats and 89% of Republicans, agree that addressing the rampant borrowing that’s endangering our economic standing and threatens their own financial futures should be a top priority for the president and Congress.
Since that survey’s release, the picture’s deteriorated at a far faster pace than the Congressional Budget Office and private forecasters anticipated, due in part to the coming tax rate reductions and spending increases embodied in President Trump’s One Big Beautiful Bill. The single major line item that’s now growing fastest, and that’s added the most to the budget shortfall since start of the pandemic, is a dark horse: interest expense. This burgeoning cost that contributes nothing towards supporting national defense, funding the nation’s promises on delivering healthcare for seniors, and funding border control, is the one budget feature most likely to increasingly outrage the folks. Recall that in the 1992 presidential race, independent candidate and political unknown Ross Perot made the exploding interest on the national debt a centerpiece of his maverick campaign, and thanks in largely to hammering home the looming danger ahead, captured nearly 20% of the popular vote.
Since 2019, interest on the debt has exploded
In the 2019 fiscal year, net interest expense was still no big deal. It totaled just $375 billion, and accounting for a modest 1.7% of GDP. By FY 2025 (ended in September), the figure had jumped to $952 billion, a rise of 153%, or 17% a year. In that same six year period, its trajectory far outstripped the still alarming surges in Medicare (25%), Medicaid (32%), not to mention national defense (7%). In FY 2025, interest ranked as the third largest spending area after Social Security, and nearly caught Medicare, which at $997 billion was less than 5% ahead of debt service. Interest gobbled 3.2% of national income, almost twice its share pre-COVID.
From FY ’19 to FY ’25, interest soared from under one dollar in ten to more than one dollar in six-and-a-half of all U.S. spending.
The ramp only accelerated from October through December, the first quarter of FY 2026. Interest expense hit $179 billion, versus $160 billion in the first three months of FY 2025. For that period at the close of last year, it towered as the nation’s 2nd largest expenditure, narrowly beating both Medicare and national defense. In its most recent Long-Term Budget Projections, the CBO estimates that interest will keep gobbling more and more of national income, going from today’s 3.2% by 4.0% by 2034. At that level, interest costs would reach $1.6 trillion—almost 70% more than today—and replace Medicare by a hair as the budget’s second highest cost. At that point, interest would be absorbing the equivalent of one in four dollars collected in all individual income taxes.
It’s the basic, “primary” deficit that’s causing the jump in interest costs
The interest takeoff arises from a fundamental problem. The underlying source is the “primary” deficit, the structural gap between revenues and outlays that that creates big shortfalls before counting interest expense. As the primary deficit grows, the U.S. must borrow the expanding difference, and that’s been the story. Adding to the pain: As the principal amount owed has kept expanding, so too has the cost of financing each new billion dollars added to the tab. Since 2019, the average rate on U.S. debt has risen substantially, from a super-bargain 2.49% 7 years ago, to 3.35% in FY 2025. And it’s only at its current range in the mid-3’s because the U.S. is relying heavily on short-term borrowings to hold down the overall expense, meaning that if the Treasury wants to reduce risk by refinancing that debt with 10 year or even longer duration bonds, the rates it pays to rise well beyond the current numbers, hiking total interest expense even more.
As the gulf between what the U.S. spent and collected kept waxing, interest became a bigger and bigger contributor to the deficits that now raise such dread. The shortfall between revenues and expenses vaulted from $998 billion in 2019 to $1.8 trillion in FY 2025. That’s a leap of $800 billion, or 80%. In that span, interest added $577 billion to the federal budget, accounting for roughly 70% of the notorious deficit. The CBO projects that under current law, the gap will zoom to $1 trillion in FY 2025, a staggering 6% of GDP, to 117% in 2034. The agency forecasts that interest will join Medicare as the top drivers of that 17 point advance.
It’s important to note that the additional tariffs imposed by the Trump administration, though a significant fund-raiser, haven’t come close to slowing that growing “V” between receipts and spending. Interest’s a big part of the story. In FY 2025, the U.S. raised around $200 billion from import duties and associated revenues, some $125 billion more than the previous fiscal year. In the same interval, interest expense grew from $881 billion to $952 billion. That extra $71 billion offsets almost 60% of the gains from tariffs.
All told, debt service is claiming an ever-greater share of the dollars America’s promised to spend on benefits for future generations. Those payments hogging more and more of our tax dollars are the price we’re paying for years of over-spending and under-taxing. If anything decisively gets American voters to focus on the damage from debt and deficits, it’s the ravages of Big Interest.
