$40 trillion debt and $1.25 trillion in interest: why the U.S. bill just got worse

# The headline numbers

# Why the comparison to 1991 is misleading if used without context On the surface the two peaks look similar: interest payments were a similar share of revenue in 1991 and 2025. The underlying conditions differ in ways that increase fiscal risk today.

• In 1991 the public debt was about 44% of GDP. Today the public debt share is above 100% of GDP. With a much larger stock of outstanding debt, any given rise in yields costs the government a lot more.

• Long-term yields in 1991 were high by historical standards but the government carried far less debt. Today yields may not be record highs, yet the government's sensitivity to those yields is greater because the debt base is so large.

# What's driving higher interest costs now

An effect called crowding out means capital flowing to corporate bond issuance reduces the pool of funds available for Treasuries, requiring higher Treasury yields to attract buyers. Higher yields translate into higher annual interest costs for the government because the existing debt must eventually be refinanced at higher rates.

# The policy response so far

# Projections and the fiscal trajectory Commentary cited the Congressional Budget Office projection that interest expense could rise to about 25% of revenue by 2036 if current trends continue. Analysts who track the numbers point out that interest costs have already tripled as a share of revenue since 2015.

# Practical implications for fiscal policy and priorities Higher interest payments reduce discretionary fiscal space. When a growing slice of federal revenue goes to servicing interest, there is less room for spending on infrastructure, education, and other public investments. It also increases the challenge of running deficits without pushing interest costs even higher.

# What to watch next

• Treasury refunding calendars and the frequency/size of buyback operations. Continued interventions would signal stress in the long-term market.

• CBO updates to interest-outlay projections and assumptions about growth and yields.

# Bottom line Interest costs are at record levels as a share of revenue because the stock of public debt is much larger than in prior peaks. Market shifts—like sustained corporate demand for long-term bonds—are raising yields and increasing the cost of servicing that debt. The immediate policy toolkit includes Treasury buybacks, but projections show interest outlays could consume an even larger share of revenue over the next decade unless trends change.