Interest on Debt Crosses $1T, With No Signs of Slowing

The U.S. national debt is entering uncharted territory, with annual interest payments surpassing $1 trillion for the first time. That figure is nearly three times higher than the $345 billion paid in 2020, according to estimates from the nonpartisan Committee for a Responsible Federal Budget, as reported by Quartz. Total federal debt now stands at roughly $38.4 trillion, though economists say the risk of an imminent default or sudden loss of investor confidence remains low.

The dollar has declined about 10% over the past year, but investors have not shown signs of panic. The United States continues to benefit from borrowing in its own currency, a key advantage that helps stabilize demand for its debt. Kent Smetters of the Penn Wharton Budget Model has said that if current trends persist, serious economic stress may not emerge for another 25 years. Even so, rising interest costs carry clear trade-offs. As more federal revenue is devoted to debt service, fewer resources remain for other priorities, and analysts warn that borrowing capacity could be constrained during a future crisis. “Excessive peacetime deficits and debt also undermine America’s ability to borrow when it matters most, in times of crisis,” Romina Boccia of the Cato Institute told the House Budget Committee.

The long-term outlook remains troubling unless policy changes are made, Fortune reports. The budget committee estimates that if courts strike down major tariffs enacted under the Trump administration and if provisions of the One Big Beautiful Bill Act are made permanent without offsets, annual interest costs could exceed $2 trillion by 2034 and reach $2.2 trillion in 2035. The committee said reversing course will require federal lawmakers to put the debt on a “downward, sustainable path.”

While members of both parties routinely pledge to rein in deficits, recent tax-and-spending packages continue to add to the red ink. The Big Beautiful Bill, for example, is projected to increase the deficit by $3.4 trillion over the next decade, further accelerating the rise in federal debt.