Net Interest Will Total $10.5 Trillion Over the Next Decade
One of the fastest-growing expenditures over the next decade will be net interest on the national debt, according to the latest projections from the Congressional Budget Office (CBO). In total, net interest will amount to an eye-popping $10.5 trillion over the next decade.
After jumping from $352 billion in Fiscal Year (FY) 2021 to $475 billion in 2022, annual net interest outlays will triple, reaching $1.4 trillion by 2033. As a share of the economy, net interest will rise from 1.9 percent of Gross Domestic Product (GDP) in FY 2022 to exceed its record as a share of GDP – 3.2 percent set in 1991 – by 2030 before reaching a high of 3.6 percent of GDP by 2033.
To put this $10.5 trillion total in perspective, this means that spending on net interest will exceed all defense spending over the next decade. In addition, we estimate the net interest spending will surpass all federal spending on children this year, meaning that we will be paying more to service our debts of the past than to invest in future generations.
For every dollar that the U.S. government will borrow over the next decade, 50 cents will be just to pay interest on our national debt.
Unfortunately, the decades to follow 2033 are projected to be in even worse fiscal shape. With deficits continuing to grow unsustainably over time, interest on debt will eventually become the largest part of the federal budget. Net interest will surpass defense spending by 2028, Medicare spending by 2044, and Social Security spending by 2050, becoming the largest single line item in the budget. By 2053, net interest will consume approximately 7.2 percent of GDP – nearly 40 percent of federal revenues.
The unsustainable outlook for net interest should be a wake-up call for policymakers. Amid high inflation and rising interest rates, the pressure has only increased on Congress and the Administration to put the nation on a healthy fiscal path.