Interest payments on U.S. debt are becoming the primary driver of future federal deficits, according to new analysis from the Congressional Budget Office (CBO). The sheer scale of past borrowing has pushed publicly held debt to $31.27 trillion as of March 31, surpassing nominal GDP for the first time and bringing the debt-to-GDP ratio to 100.2%.
Growing Fiscal Burden
The CBO projects that interest costs alone will skyrocket from $1 trillion this fiscal year to $2.1 trillion by 2036. By then, publicly held debt is expected to balloon to 120% of GDP. This trajectory suggests that future administrations will face increasing constraints on fiscal policy, not due to new spending initiatives but because of the need to manage the debt stock itself.
Future U.S. administrations may increasingly find that fiscal policy is constrained not by their willingness to run primary deficits, but by the need to manage the debt stock itself.
Causes and Consequences
The widening gap between primary deficits (which exclude interest payments) and total deficits began after COVID-era spending and aggressive Federal Reserve rate hikes. While primary deficits are expected to stabilize at around 2% of GDP, total deficits will steadily climb to nearly 10% by the mid-2050s. This trend could limit resources available for critical areas like national security, raising concerns about America's long-term strategic position.
Historians and analysts warn that any great power spending more on debt servicing than defense risks losing its global influence. As fiscal pressures mount, balancing debt management with broader economic and security priorities will become increasingly complex.