U.S. Interest Bill Hits Record 18.5% of Revenue on $40 Trillion Debt
Updated
Updated · Fortune · Sep 7
U.S. Interest Bill Hits Record 18.5% of Revenue on $40 Trillion Debt
2 articles · Updated · Fortune · Sep 7
Summary
Net federal interest payments reached 18.5% of U.S. revenue in 2025, topping the 1991 record and consuming about $1.25 trillion—more than the 2026 defense budget.
That burden has tripled since 2015 as higher rates hit a much larger debt stock: debt held by the public now exceeds $32 trillion and 100% of GDP, versus about 44% in 1991.
DoubleLine and other analysts say the risk is greater than the 1991 comparison suggests because ordinary-looking long-bond yields now bite harder, forcing more borrowing just to service existing debt.
$225 billion of AI-related bond issuance in the first half of 2026 has also pulled capital toward corporate debt, pressuring Treasury yields higher in what Ed Yardeni called a crowding-out effect.
The Congressional Budget Office projects interest costs rising to 25% of revenue by 2036, even as the Treasury has doubled 10-to-30-year bond buybacks to at least $4 billion per operation to steady the market.
Since one-fifth of federal revenue now solely pays interest, what critical public investments will be quietly sacrificed to feed this $40 trillion burden?
With tech giants draining capital for AI, could the government's desperate bond buybacks trigger an unprecedented liquidity crisis in the Treasury market?
As volatile private foreign investors replace central banks in holding U.S. debt, what hidden trigger could spark a sudden, catastrophic capital flight?