U.S. Debt Interest Now Costs $2.9 Billion a Day, Treasury Says

By Daniel Okafor

The United States paid $1.05 trillion in net interest on its debt in fiscal 2026 — about $2.9 billion every day, according to Treasury Department data released Friday. That bill grew 8% over the year, outpacing the growth of total federal spending, federal revenue and the entire economy.

The full fiscal picture explains why. The federal budget deficit widened 12% to $1.99 trillion, from $1.78 trillion in fiscal 2025. Revenue rose 3% to $5.4 trillion. Spending climbed 6% to $7.4 trillion. Social Security and Medicare remained the largest line items. Interest on the debt ranked third — ahead of defense spending and Medicaid.

How expensive has borrowing become?

Gross interest costs reached $1.36 trillion for the fiscal year, Treasury data show, at an average interest rate of 3.53%. That rate has more than doubled since 2021, just before the Federal Reserve began raising rates to fight inflation.

The Peter G. Peterson Foundation estimated net interest costs now equal 3.2% of GDP. That breaks the previous record set in 1991. Net interest growth of 8% exceeded real GDP growth of about 2% and nominal GDP growth of about 6%.

The debt stock behind these numbers is large. Gross U.S. debt stands at $40 trillion. Debt held by the public equals 100% of GDP.

What does the debt maturity wall change?

Treasury Secretary Scott Bessent has financed the deficit by issuing more short-term debt and retiring long-term obligations. That choice exposes the budget to market rates. About one-third of publicly held debt — more than $10 trillion — matures within the next 12 months, forcing the government to roll it over at today's higher rates.

The market is not cooperating. The 10-year Treasury yield now sits above 5%, blowing past the Congressional Budget Office's forecasts of 4.1% for this year, 4.2% in 2027, 4.3% from 2028 to 2031, and 4.4% from 2032 to 2036. The CBO projected in February that annual interest expenses would reach $2.1 trillion by 2036 — before President Donald Trump launched the Iran war, which sent oil prices and bond yields soaring.

The Committee for a Responsible Federal Budget puts the risk in figures. If yields stay about 1 percentage point above the CBO's estimates, interest costs will surge to $2.8 trillion, or 5.9% of GDP, by the end of the decade.

"Higher interest begets more debt, and greater debt begets higher rates and higher interest. Eventually, the whole thing could come crashing down," CRFB President Maya MacGuineas said last month.

She added: "That's why Washington needs a fiscal intervention now, before it's too late. The President, the Treasury Secretary, and Congressional leadership need to understand the severity of this issue. There are no easy fixes, and we can't just wish this problem away."

Can growth fix the problem?

Washington shows little appetite for cutting spending or raising revenue. Trump has called for a $5,000 "dividend" check to Americans if Republicans win the midterm elections. His administration is already handing out "rebates" to millions of Medicare and Affordable Care Act enrollees.

Bessent argues a hotter economy can bring the debt under control. "With 3% growth, we grow our way out of this," he said at Southern Methodist University last month. "We'll get to the other side of this Iran conflict, and the underlying economy is very, very strong, and I think reaccelerating."

CBO Director Phillip Swagel disagrees, and he did the math. Federal spending also boosts growth, which lifts wages and raises Social Security outlays, he noted. A strong economy tends to push interest rates higher, which adds to interest costs. Assuming rates of 4% to 5%, Swagel estimated nominal GDP growth would have to reach 7%–8% and real growth 5%–6% to stabilize the debt. Real GDP grew 2.2% in the second quarter, and even bullish Wall Street forecasts put full-year growth at 2.5%.

"So growth will help, but it's probably not plausible that growth alone will stabilize our fiscal trajectory," Swagel said last week. "So then we're left with changes in revenues and changes in spending, and those are political choices."

The Treasury projects interest payments will be the fastest-growing portion of the federal budget in the coming years. With $10 trillion of debt repricing within 12 months and the 10-year yield above 5%, the cost of that political delay is already compounding daily.