Interest on the $38.8 trillion national debt has tripled since 2020, and it already costs taxpayers more than defense and Medicaid

Fortune

by Nick Lichtenberg

March 2, 2026

AI-Generated Deep Dive Summary

The U.S. is now paying nearly $970 billion annually in interest on its $38.8 trillion national debt—a figure that has tripled since 2020 and exceeds federal spending on national defense or Medicaid. This growing financial burden, driven by rising debt levels and climbing interest rates, has already pushed interest costs to record highs, surpassing key government programs like Medicare in just a few years. By 2036, net interest payments are projected to reach $2.1 trillion, consuming one-quarter of all federal revenue and outpacing even Social Security and military spending. The rapid increase in interest costs stems from two main factors: the federal debt has ballooned by trillions since the pandemic, and interest rates have surged from near-zero lows to current levels. As a result, interest costs as a share of GDP have doubled—from 1.6% in 2021 to an expected 3.2% by 2025. This trend is unsustainable, with projections showing that by 2047, interest payments could overtake Social Security as the largest federal spending category. This "crowding-out" crisis means other critical priorities—such as infrastructure, education, and healthcare—are being squeezed out as federal dollars shift to debt servicing. Without a credible deficit reduction plan, the U.S. faces an escalating fiscal emergency that threatens long-term economic stability and erodes public trust in government finances. The national debt grows by roughly $6.43 billion daily, highlighting the urgent need for action to prevent interest costs from devouring the federal budget entirely. For businesses, this underscores the risks of rising borrowing costs and the potential impact on economic growth and policy priorities.

Verticals

businessfinance

Originally published on Fortune on 3/2/2026