Interest Costs Have Nearly Tripled Since 2020

The recent release of the final Monthly Treasury Statement from the Treasury Department shows that net interest costs totaled $882 billion in Fiscal Year (FY) 2024. The Monthly Treasury Statement shows that:

• Net interest spending increased by $223 billion from FY 2023 and has nearly tripled since 2020.
• Interest was the second largest federal expenditure in FY 2024, behind only Social Security.
• We spent more on interest on the national debt in FY 2024 than national defense or Medicare.

Over the past few years, interest costs borne by the federal government have risen dramatically. While interest totaled $345 billion in FY 2020 and $352 billion in 2021, when interest rates were very low due to the COVID-19 pandemic, that changed in 2022 when the Federal Reserve began raising interest rates, and we had accumulated an additional $6 trillion of debt from COVID relief measures. After rising by more than $100 billion between 2021 and 2022 and then by more than $175 billion between 2022 and 2023, net interest costs jumped $223 billion in 2024.

As a result of these large interest payments, the federal government now spends more on interest than most major programs and budget areas. This includes Medicare and national defense, which is more than veterans benefits and services, education, and transportation programs combined. In FY 2024, the federal government continued to spend more on interest than all spending on children. The only thing the federal government spent more on in FY 2024 was Social Security.

Interest costs are projected to continue climbing over the next decade and beyond, eclipsing their record as a share of the economy this fiscal year before rising to exceed Social Security by FY 2051. The alarm bells are clearly ringing when it comes to our unsustainable national debt. Policymakers should put in place reforms that reduce the growth of debt and stabilize it as a share of the economy before interest and debt spiral further out of control.