WASHINGTON — The cost of servicing the national debt has surpassed defense spending for the first time in a fiscal year, reaching $827 billion, as rising Treasury yields continue to pressure the federal budget and American borrowers. The figure eclipses the amount allocated to national defense, highlighting a fiscal burden mounting under the weight of persistent inflation and elevated interest rates.
Treasury Yields Hit Multi-Decade Highs
The 10-year U.S. Treasury note yield climbed above 4.7 percent on Friday, reaching levels not seen in nearly two decades. The 30-year bond followed suit, delivering exactly the opposite outcome than what was promised to voters. The administration had pledged that policy moves would deliver cheaper borrowing costs, yet American families now face steeper mortgage and auto loan rates.
Federal Reserve Chairman Kevin Warsh, appointed by the president, acknowledged during his second press conference that inflation continues to run hot but offered no clear path for relief. The admission came as the economy posted a sluggish 1.5 percent annual growth rate in the prior quarter.
Fiscal Reality and Election Pressures
The political fallout is already materializing ahead of the November midterm elections. Research from Georgetown University and the University of California, Berkeley indicates voters prioritize whether incomes are outpacing inflation over headline economic indicators. With hourly wage gains barely keeping pace with rising prices over the past 12 months — and debt service costs excluded from the consumer price index — the affordability squeeze has become a liability.
“It cut against Democrats in 2024, and if prices and borrowing costs keep outrunning wages into the fall, the same logic points at Republicans now,” said Georgetown economist Juan Felipe Riaño.
The White House pointed to a potential resolution of foreign conflicts as a mechanism to lower energy costs and subsequently allow rate cuts. However, the bond market reflects the immediate reality of financing large-scale infrastructure projects and the lingering effects of trade policy adjustments that spiked borrowing costs earlier in the administration. For American workers, the balance sheet looks clear: government debt service is now a larger line item than defense, and household credit grows more expensive by the quarter.