U.S. net interest outlays were $970 billion in fiscal year 2025, equal to 3.2 percent of GDP. In the Congressional Budget Office’s February 2026 baseline, they rise to a projected $1.0 trillion in FY2026 and $2.1 trillion in FY2036. Those figures make interest a major and growing part of the federal budget, but they do not mean a particular program automatically loses one dollar whenever interest costs rise.
What “debt service” means in this comparison
Here, debt service means the federal government’s net outlays for interest, the CBO measure that can be compared with other federal outlays. It counts interest paid on debt held by the public, minus interest income received by the government. Interest paid between federal accounts, such as trust funds, is intragovernmental and does not affect the budget deficit.
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This is not repayment of the federal debt’s principal. Nor should it be confused with Treasury’s gross interest transactions or broader accrual-based measures used in financial reporting. The comparison below uses CBO net interest outlays throughout.
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The CBO’s March 30, 2026, account of FY2025 results reports $970 billion in net interest outlays, or 3.2 percent of GDP. The February 2026 baseline then projects $1.0 trillion in net interest for FY2026. The projected amount is substantial, but still far below total mandatory outlays.
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| Measure | FY2025 actual | FY2026 projection |
|---|---|---|
| Net interest outlays | $970 billion; 3.2% of GDP (CBO, 2026) | $1.0 trillion; 3.3% of GDP (CBO February 2026 baseline) |
| Mandatory outlays | Not stated in the cited FY2025 summary | $4.5 trillion (CBO February 2026 baseline) |
| Discretionary outlays | Not stated in the cited FY2025 summary | $1.9 trillion (CBO February 2026 baseline) |
In FY2026, projected net interest is about one-fifth of mandatory outlays and a little over half of discretionary outlays. The categories differ in scale: mandatory outlays include Social Security, Medicare, and other programs, while discretionary outlays are funded through appropriations. CBO says projected net interest exceeds mandatory spending on any single program other than Social Security or Medicare.
For context on the actual year, CBO reports that Social Security and Medicare together made up more than one-third of all federal spending in FY2025 and, combined, exceeded discretionary spending. Those are FY2025 results, not a comparison of interest with either program individually.
How the projected comparison changes by FY2036
In the February 2026 baseline, CBO projects net interest outlays of $2.1 trillion in FY2036, or 4.6 percent of GDP—nearly equal to all discretionary spending. Total federal outlays are projected at $7.4 trillion in 2026 and $11.4 trillion in 2036. Outlays rise from 23.3 percent of GDP in 2026 to 24.4 percent in 2036, as growth in Social Security, Medicare, and net interest is partly offset by declining discretionary outlays as a share of GDP.
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These are projections conditioned on CBO’s baseline assumptions and laws in place on January 14, 2026; they are not reported future outcomes. CBO attributes most of the projected increase in interest outlays from 2025 to 2026 to growth in debt held by the public, which it projects to rise 6.4 percent. Over the longer run, CBO’s baseline has net interest rising by an average 7.5 percent annually.
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Why a larger interest bill does not identify a specific cut
Interest is an obligation associated with outstanding debt. Mandatory spending generally follows eligibility and benefit rules established in law; discretionary spending is set through appropriations. That makes the budget categories different in how they are determined, but the totals alone do not show that rising interest costs mechanically reduce any named program dollar-for-dollar.
CBO’s baseline compares projected spending, revenues, deficits, and debt under its assumptions. It does not by itself establish which policy choices lawmakers will make in response. The practical budget pressure is that a larger share of federal resources is projected to go to interest, leaving less room for other priorities unless revenues, borrowing, or spending policies change.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Explore how budget changes affect interest costs
CBO’s How Changes in Revenues and Outlays Would Affect Debt Service, Deficits, and Debt: 2026 to 2036 tool estimates approximate effects on interest costs, deficits, and debt when revenues or outlays change relative to the baseline. It also provides projected effective rates on new borrowing and related Treasury yields. The estimates are baseline-based, so they are useful for exploring scenarios rather than treating a single result as certain.
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