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Federal net interest outlays were $970 billion in fiscal year 2025, or 3.2% of gross domestic product (GDP). In the Congressional Budget Office’s February 2026 baseline, they rise to $1.0 trillion in FY2026 and $2.1 trillion in FY2036. That makes interest a major and growing budget category—but the figures compare spending totals; they do not show that each dollar of interest automatically removes a dollar from a particular program.
What “debt-service costs” measure
Here, debt service means the federal government’s net outlays for interest, not repayment of the full principal balance of its debt. The Congressional Budget Office (CBO) defines net interest as interest paid on debt held by the public, offset by interest income the government receives. Interest paid between federal accounts, such as trust funds and other government accounts, is intragovernmental and does not affect the budget deficit. See the CBO’s The Budget and Economic Outlook: 2026 to 2036 for the baseline and budget definitions.
This net budget measure is the appropriate one for comparing interest with other federal outlays. It is not the same as Treasury’s gross interest transactions or broader accrual-based measures used in financial reporting.
How interest compares with spending in FY2025 and FY2026
The time frames matter: FY2025 is reported actual spending, while FY2026 figures below are CBO projections in its February 2026 baseline. The categories are not interchangeable: mandatory spending generally follows statutory eligibility and benefit rules, discretionary spending is controlled through appropriations, and interest is an obligation associated with outstanding debt.
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| Fiscal year and status | Net interest | Mandatory outlays | Discretionary outlays |
|---|---|---|---|
| FY2025 actual | $970 billion; 3.2% of GDP (CBO, 2026) | Not stated in the cited FY2025 figures | Not stated in the cited FY2025 figures |
| FY2026 CBO baseline projection | $1.0 trillion; 3.3% of GDP | $4.5 trillion | $1.9 trillion |
CBO’s March 30, 2026 release on FY2025 budget results reports that Social Security and Medicare together made up more than one-third of all federal spending and, combined, exceeded discretionary spending. For FY2026, the CBO baseline says net interest is smaller than mandatory spending as a whole, but larger than spending on any mandatory program other than Social Security or Medicare. The comparison is about budget scale, not a claim that interest is a program with the same rules or purpose as benefits and appropriations.
What the CBO baseline projects through FY2036
In CBO’s February 2026 baseline, net interest reaches a projected $2.1 trillion in FY2036, equal to 4.6% of GDP. It nearly matches all projected discretionary spending. Across the same baseline, total federal outlays rise from $7.4 trillion, or 23.3% of GDP, in FY2026 to $11.4 trillion, or 24.4% of GDP, in FY2036.
CBO attributes the projected increase in interest outlays in FY2026 mostly to growth in debt held by the public, which it projects will rise 6.4% from FY2025 to FY2026. Over the longer run, its baseline projects net interest to grow by an average 7.5% annually. These are estimates conditioned on CBO’s baseline assumptions and laws in place on January 14, 2026—not guaranteed outcomes. CBO also attributes the increase in outlays as a share of GDP through 2036 to growth in Social Security and Medicare and rising net interest, partly offset by declining discretionary outlays as a share of GDP.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What “compete” means—and what the comparison cannot show
Interest costs and program spending appear in the same federal outlay totals, so a larger interest bill can leave policymakers with less room to pursue other priorities within a chosen budget path. But the totals alone do not establish a direct, automatic dollar-for-dollar trade with any named program. Mandatory benefits, appropriated spending, revenues, borrowing, and policy choices all affect the budget; a projection that interest grows does not identify which spending, if any, will change in response.
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For a scenario-specific estimate, 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. Its results are baseline-based estimates, not a forecast of which programs lawmakers will change.
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