US Debt Interest Bill to Hit $20 Trillion Over Next Decade

The U.S. Treasury will spend $20.1 trillion on interest payments for the national debt between 2026 and 2036, according to projections released this week by the Congressional Budget Office (CBO). By 2036, that works out to a little under $2.5 trillion a year — or roughly $200 billion every month.

The figure covers interest on the current $40 trillion debt burden plus the deficits the government will add over the next decade. For context, the scale is historic: in 2026, the Treasury paid $1.2 trillion in interest. The CBO expects that number to roughly double within a decade.

The comparison that should grab practitioners: the CBO projects defense spending at $1.1 trillion by 2036. Debt service will run at about twice that level. Interest is quietly becoming the largest line item the federal government writes checks for.

What does this change for the deficit picture?

Plenty — and not in a good direction. Despite political pressure to shrink budget shortfalls, including proposals to cap deficits at 3% of GDP instead of the current 6% to 7%, the CBO expects the gap to keep widening. The Treasury has confirmed the fiscal year 2026 deficit came in at $2 trillion. The CBO projects it will grow beyond $3 trillion by 2036.

Add it all up and the cumulative budget shortfall between now and a decade from now reaches $25.6 trillion, per the CBO's numbers.

A major driver is social spending. Like many Western peers, the U.S. has an aging population, meaning more people leaving the workforce and relying on state social and health services. The CBO reports that spending in this category stood at $3.7 trillion in 2026 and will likely reach $6.1 trillion by 2036 — a jump of about 65% in ten years.

The timing adds urgency. The Social Security trust fund is due to run out in a little over seven years, according to the Committee for a Responsible Federal Budget's countdown trackers, and Medicare is projected to go insolvent in six and a half years. Budget questions are climbing the agenda for both politicians and the public.

Can growth — or AI — fix it?

Policymakers have cycled through answers. The current administration pitched tariffs as a potential gamechanger for rebalancing. More recently, politicians have leaned on the promise of AI, suggesting the U.S. economy could simply grow its way out of fiscal trouble.

Budget experts aren't convinced. One wrinkle: if AI replaces human workers with machines and robotics, a major source of government revenue — income taxes — could shrink at the same time.

Phil Swagel, director of the CBO, put it bluntly at a panel organized yesterday by the Bipartisan Policy Center and the National Governors Association. "We have a 6% of GDP structural budget deficit, which is unprecedented … [at] a time of the economy doing reasonably well given the headwinds, we're not in a global conflict and so on, there's no pandemic," he said.

"It's a structural deficit, it's large, we have to address it. Stronger growth will help, but it's not enough. We need more than just growth, we need policy actions," Swagel added.

No deadline — for better and worse

The CBO is strictly nonpartisan. It makes no value judgments or policy recommendations, and its projections don't predict when — or whether — a fiscal crisis might hit, even if members of Congress ask.

Swagel acknowledged the ambiguity: "The challenge for me is I can't say for sure what is the deadline, when do we need to act. That's something members want to know, and we don't know, which is both a blessing and a curse."

"The blessing is that it's much better to have time to act rather than having a crisis immediately … On the other hand, we have to act at some point, and the sooner we do, the better, to avoid all the problems that will arise."

For businesses and investors, the practical takeaway is that debt service costs are on a path to crowd out other federal priorities, and the CBO — the most authoritative scorekeeper in Washington — sees no growth scenario that closes the gap on its own. The question now is which policy actions come first, and how markets price the wait.