America’s Debt is Already Costing Taxpayers

The federal government is closing in on its next borrowing milestone: $40 trillion. On its public data portal for federal finance and debt transparency, the U.S. Treasury updates a national debt figure daily. That figure recently surpassed $39 trillion, reaching $289,000 per American household. Nowhere on this page, however, does the Treasury mention that the federal debt has already began impacting ordinary Americans, or that its trajectory is unsettling and historically unprecedented. This information is as significant as any raw number, and the public ought to know.

American households already bear the tangible costs of federal indebtedness. By any measure, interest expense on debt held by the public— the principal source of growth in the national debt—is climbing at a historic pace toward historic highs. In the first five months of fiscal year (FY) 2026, it was 7.2 percent higher than in the same period a year earlier. In FY 2025, the federal government spent $970 billion on interest payments—roughly one-fifth of all federal revenue. That amounted to about $7,300 per household, money lost today to pay for yesterday’s overspending.

In turn, today’s overspending will propel interest expense tomorrow—an astounding $2 trillion by 2036. Per one recent estimate, growth in net interest payments accounts for 67 percent of the long-term structural deficit—more than double the share attributed to mandatory spending. Roughly $47,000 for each and every American will be diverted to pay interest on debt over the next decade—$16.2 trillion in total. Still, these projections are far from the most pessimistic. Even a one-percentage-point increase in Treasury rates could add trillions of dollars to debt-service costs over time.

These are dollars unavailable for funding education, healthcare, or research—or, more aspirationally, debt service or a tax cut.

Yet interest is not the sole costly byproduct of a debt-financed, spendthrift federal government. The debt burden bears down an otherwise dynamic American economy as federal borrowing displaces private investment and raises borrowing costs in financial markets. The Congressional Budget Office estimates that “for each dollar that the federal deficit increased, domestic private investment would fall by 33 cents.” For the economy, this means many investment projects seeking capital will never find it. Capital never secured yields no gains in output and never translates into higher living standards.

Ample research on high public debt-to-GDP ratios and on the steepening trajectory of those ratios—especially when debt is already elevated—suggests that both reduce long-term growth. Diminished economic dynamism sounds abstract and technical until Americans witness the purchasing power of their incomes stagnate, their pay raises screech to a halt, and their homeownership prospects dwindle.

If the debt level was the sole threat, the U.S. fiscal position would not be nearly so bleak. After all, the U.S. debt-to-GDP ratio has surged before, peaking above 119 percent in 1946 before falling to 31 percent in 1974. And as the U.S. Treasury notes, “[t]he U.S. has carried debt since its inception.” Although factually true, the point lacks nuance too critical to omit. In the past, time would heal the nation’s indebtedness incurred during times of war or economic crisis. Inflation and real economic growth have eroded the real value of the national debt in the years following major exigencies. Today, deficits––and the debt they feed––are only projected to worsen relentlessly.

Congress has abandoned the goal of keeping deficits below the rate of GDP growth, let alone balancing the budget. Last fiscal year’s shortfall of 5.8 percent of GDP is set to rise to 6.7 percent of GDP by 2036 and 9.1 percent by 2056, according to the Committee for a Responsible Federal Budget (CRFB).

To meet even the 3 percent of GDP target accepted by many economists, Congress must reduce projected deficits over the next decade by $10 trillion. Without entitlement reform, this is all but unattainable. Mandatory spending—led by Social Security, Medicare, and Medicaid—already accounts for 68 percent of spending growth. Along with interest payments, those three entitlements will be the primary causes of the long-term structural deficit.

Lawmakers could maintain an uncompromisingly protective posture toward existing entitlement commitments until the road to fiscal crisis offers no detour, or they could yield to what the country’s perilous fiscal state demands of them. CRFB concludes: “Without a course correction or major change in circumstance, however, some form of crisis is almost inevitable.” Only Congress can avert the fiscal dead end to which the nation’s current fiscal path leads.