Interest on National Debt
Now the 2nd largest federal expense
⚠️ Rapidly Growing Expense
Interest on the national debt has surpassed Medicare and Defense spending to become the second-largest federal expense after Social Security. In FY 2024, interest payments increased by 34% ($239 billion) from the previous year.
This means more of your tax dollars go to paying interest instead of funding programs and services.
Quick Facts
FY 2024 Interest Paid
$949 Billion
↑ 34% from 2023
Total National Debt
$35.9 Trillion
As of Oct 2024
Average Interest Rate
3.32%
On outstanding debt
% of Federal Revenue
18%
Of all tax revenue
Why Interest Payments Are So High
1. Rising Interest Rates
The Federal Reserve raised rates from near 0% to over 5% to combat inflation. As old low-rate bonds mature and are replaced with higher-rate debt, interest costs surge.
2. Growing Debt Principal
The national debt has grown from $5.7 trillion in 2000 to $35.9 trillion today. More debt means more interest payments, even at the same rates.
3. Persistent Deficits
The federal government spends more than it collects in revenue each year. In FY 2024, the deficit was $1.8 trillion, requiring more borrowing.
Who Gets These Interest Payments?
- Foreign governments (31%): Japan ($1.1T), China ($775B), UK, others
- Federal Reserve (18%): Returns profits to Treasury
- Mutual funds (17%): Your 401(k) might own Treasury bonds
- State & local governments (9%): Pension funds, reserves
- Banks (7%): Commercial banks, savings institutions
- Private pensions (5%): Corporate and union pension funds
- Insurance companies (4%): Life insurance, property insurance
- Individual investors (9%): Savings bonds, Treasury Direct
Future Projections
According to the Congressional Budget Office:
- Interest costs will reach $1.6 trillion by 2034
- Will become the largest federal expense by 2051
- Will consume 38% of all federal revenues by 2053
- Total debt projected to reach 181% of GDP by 2053
Note: Unlike spending on programs, interest payments provide no direct services or benefits to citizens. They are purely the cost of past borrowing.