U.S. Debt Interest Payments Hit $3 Billion a Day as Deficit Widens to $1.99 Trillion

Federal interest payments on the national debt climbed to roughly $3 billion a day in fiscal 2026, rising faster than total spending, revenue and economic growth, according to Treasury Department data released Friday. Net interest costs rose 8% to $1.05 trillion, a figure that now exceeds defense spending and Medicaid and trails only Social Security and Medicare among the largest federal obligations.

The broader budget picture deteriorated as well. The federal deficit widened to $1.99 trillion, 12% worse than the $1.78 trillion gap recorded in fiscal 2025. Revenue grew 3% to $5.4 trillion, while spending rose 6% to $7.4 trillion, leaving the shortfall to expand despite a modest increase in receipts.

Gross interest costs reached $1.36 trillion at an average rate of 3.53%, more than double the rate in 2021, before the Federal Reserve began an aggressive tightening cycle to curb inflation. The Peter G. Peterson Foundation estimated that net interest costs equaled 3.2% of GDP, breaking a record set in 1991. The figure also outpaced both real GDP growth of about 2% and nominal growth of about 6%.

The pressure is compounded by the structure of the debt. With gross U.S. debt at $40 trillion and publicly held debt at 100% of GDP, about one-third of publicly held obligations — more than $10 trillion — is due to mature within the next 12 months. Treasury Secretary Scott Bessent has been issuing more short-term debt and retiring long-term obligations, meaning the government must roll over that debt at today's higher rates.

In February, the Congressional Budget Office projected annual interest expenses would reach $2.1 trillion by 2036. But the Iran war sent oil prices and bond yields soaring, and the 10-year Treasury yield now sits above 5%, well past the CBO's forecasts of 4.1% this year and 4.4% by the mid-2030s. The Committee for a Responsible Federal Budget estimates that if yields remain about a 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, calling for a fiscal intervention before it is too late.

So far there is little sign of appetite in Washington for tackling spending or revenue. President Donald Trump has called for a $5,000 «dividend» check to Americans if Republicans win the midterm elections and is already distributing «rebates» to millions of Medicare and Affordable Care Act enrollees. Bessent has argued that faster growth can bring the debt under control, saying at Southern Methodist University last month that «with 3% growth, we grow our way out of this.»

CBO Director Phillip Swagel said last week that faster growth is unlikely to keep the debt in check. Stronger growth brings in more revenue, he noted, but federal spending also boosts growth, lifting wages that affect Social Security outlays, while a robust economy tends to push interest rates higher. Assuming rates of 4% to 5%, Swagel estimated nominal GDP growth would need to reach 7% to 8%, and real growth 5% to 6%, to stabilize the debt — more than double the 2.2% real pace in the second quarter, and well above bullish Wall Street forecasts of 2.5% for the full year.

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

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Caroline Mercer

World News Correspondent

Caroline Mercer covers public affairs, politics, business, culture and daily news for Core Memo. The role focuses on verification, context, and clear explanations for readers.

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