US federal debt interest expense hits record $1.38 trillion annualized, equivalent to 4.2% of GDP, doubling in five years.
Macro & Markets ·
US federal debt interest expense has reached an estimated annualized level of $1.38 trillion, representing 4.2% of gross domestic product—the highest share since 1997. This marks a sharp departure from late 2020, when interest costs stood at 2.3% of GDP. Over the past five years, annualized interest expense has grown by roughly $900 billion, a near-doubling that translates to an average annual increase of 24%.
The trajectory has accelerated in the current fiscal year. Through the first nine months of FY2026, interest expense totaled $827 billion, up $78 billion year-over-year and marking the highest nine-month total on record. The sustained rise reflects both elevated Treasury yields and the cumulative effect of previous deficit spending, compounding the fiscal burden.
What remains unclear is how policymakers will address the widening gap between revenue and interest payments, or whether the trend will stabilize as rates potentially moderate. The implications for future fiscal flexibility and the capacity to fund other government priorities remain open questions.