America Is Now Spending More on Debt Interest Than Defense

The federal government has crossed a threshold that changes how every future budget gets written.

What to Know

• Federal debt interest spending will exceed $1 trillion in 2026, surpassing the entire U.S. defense budget.
• National debt has climbed to $38.8 trillion, equal to roughly 124% of the U.S. economy.
• Washington ran a $1.7 trillion deficit in 2025, borrowing nearly $5 billion per day.
• Interest costs are on track to hit $2 trillion annually by 2036.
• A bipartisan Senate coalition introduced the Fiscal Commission Act in March 2026 to force a structured fix.

For most of American history, the federal government's biggest bill was the cost of keeping the country safe. That changed in 2026. For the first time in modern history, the interest payments the U.S. owes on its accumulated national debt have surpassed the entire defense budget. The country is now paying more to service past borrowing than it spends on the Army, Navy, Air Force, and all of national security combined.

This is not a theoretical warning. The Congressional Budget Office projects federal interest payments will exceed $1 trillion in 2026, while the defense budget sits at roughly $895 billion to $961 billion for the same fiscal year. The crossover is real, it is happening now, and if current trends hold, it will get significantly worse over the next decade.

How the Country Got Here

For decades, low interest rates made federal borrowing cheap and the growing debt manageable. That math collapsed when the Federal Reserve raised interest rates sharply starting in 2022 to fight inflation. The U.S. now carries a massive debt load and is refinancing it at rates it has not faced in a generation.

The result is a compounding problem. The American Action Forum estimates that net interest costs will grow by more than 106% over the next ten years and by more than 538% over the next thirty years if the trajectory does not change. By some projections, interest payments will become the single largest line item in the entire federal budget by the 2040s, surpassing even Social Security.

The core mechanic is straightforward. Deficits add to the debt each year. A bigger debt at higher rates means a bigger annual interest bill. A bigger interest bill means larger deficits, which add more to the debt. That cycle does not stop on its own.

What Gets Crowded Out

The reason this matters to everyday Americans is not abstract. Every dollar the Treasury sends to bondholders as an interest payment is a dollar that cannot fund roads, medical research, veterans' benefits, or education. When interest costs grow faster than tax revenues, the government faces a shrinking pool of money for everything it actually does.

Romina Boccia, Director of Budget and Entitlement Policy, Cato Institute

The Bipartisan Policy Center put it plainly: federal interest payments are "crowding out our ability to invest in critical programs." The Cato Institute's Romina Boccia warned that if bondholders lose confidence in U.S. fiscal management, lawmakers could face forced austerity cuts or pressure on the Federal Reserve to allow inflation to run higher. Neither outcome is good for household budgets.

The Peter G. Peterson Foundation confirmed that interest costs exceeding $1 trillion per year is no longer a projection but a current reality, and that the time to act is now, for the next generation.

A Bipartisan Acknowledgment That Something Has to Change

Congress has largely avoided this conversation for years, but a growing coalition is now forcing it onto the floor.

In March 2026, a bipartisan Senate coalition introduced the Fiscal Commission Act, backed by ten senators from both parties. The bill would establish a 16-member commission of twelve elected officials and four outside experts, tasked with producing legislation to stabilize the debt-to-GDP ratio within 15 years and improve the solvency of federal trust funds over 75 years.

The commission must vote on its recommendations by May 2027, and any approved legislation would receive expedited consideration in both chambers.

Mitt Romney, Former U.S. Senator

Former Senator Mitt Romney called continued borrowing "unconscionable."

Joe Manchin, Former U.S. Senator

Former Senator Joe Manchin warned that the effort must lead to real action and not just another report that gathers dust. The Fiscal Commission Act does not itself cut a dollar or raise a dime. What it does is create a structured, accountable process for a conversation Congress has avoided for years.

Wrap Up

The moment when interest on the national debt exceeds defense spending is a signal that the cost of past decisions is now actively competing with the country's ability to fund its present priorities. Every year that interest payments grow faster than revenues, the choices available to future Congresses get narrower.

For American households, a government that spends an ever-larger share of its budget on debt service has less flexibility to respond to recessions, emergencies, or the demands of a growing population. The CBO projects interest costs will reach $2 trillion annually by 2036, nearly double today's level. That trajectory is not locked in, but changing it requires political will that has so far been in short supply. The Fiscal Commission Act is at minimum an acknowledgment that the conversation cannot wait any longer.