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- US federal budget deficit surged 12% to $1.99T as spending reached $7.4T, with net interest payments becoming 3rd-largest spending item behind Social Security, Medicare
By Dilara Zengin and Emir Yildirim
WASHINGTON/ISTANBUL (AA) - The US federal government’s over $1 trillion of interest payments on its whopping $40.4 trillion of national debt continue to burden the nation’s budget, coupled with high Treasury bond yields.
The US government’s budget deficit surged 12% year-on-year to $1.99 trillion for the fiscal year ending Sept. 30, marking the highest level in the past five years, trailing behind the $2.77 trillion shortfall in fiscal year 2021 due to the COVID-19 pandemic, according to the Treasury Department data.
Meanwhile, federal revenues climbed 3% to $5.4 trillion in fiscal year 2026, while total spending surged 6% to $7.4 trillion, driving up the government’s net interest payments to a record $1.05 trillion, up from $970.4 billion in fiscal year 2025.
The US federal government’s net interest payments steadily climbed from $352.3 billion in 2021 to $475.1 billion in 2022, $659.2 billion in 2023, and $881.7 billion in 2024.
The gross interest payments surged from $1.22 trillion in fiscal year 2025 to $1.36 trillion in fiscal year 2026.
Net interest payments became the third-largest spending item in the US federal budget, following $1.67 trillion allocated to Social Security and the $1.07 trillion spent to fund Medicare.
The data showed that the $1.05 trillion of net interest payments exceeded the $1.03 trillion in healthcare spending and defense expenditures of $965.2 billion.
The Congressional Budget Office projects the net interest payments to reach $1.1 trillion in fiscal year 2027 and to $2.1 trillion in fiscal year 2036, as the total 10-year interest costs are estimated to reach $16.2 trillion.
The growing borrowing costs are expected to boost the ratio of net interest payments to gross domestic product from the current level of 3.3% to 4.6% by 2036.
Padhraic Garvey, regional head of research for the Americas at ING, told Anadolu that interest payments reached around 12% of total public spending in the US.
Garvey stated that this rate is 4% in France in an example to draw attention to the worse situation of the US.
He noted that rising interest rates pressure consumers and companies, but the additional concern from the surging federal interest payments have yet to be significant.
He added the advent of artificial intelligence has so far prevented a destabilizing macroeconomic effect, exerting upwards pressure on real interest rates, while the US economy is expected to grow 2% even if employment growth remains limited.
Dilara Zengin Okay
