Interest Payments Reach a Record Share of Revenue
The U.S. government’s rapidly expanding debt burden is becoming increasingly expensive to maintain.
According to a recent analysis from investment management firm DoubleLine, federal net interest payments in 2025 reached 18.5% of government revenue, narrowly surpassing the previous record of 18.4% set in 1991.
That translates to roughly $1.25 trillion in annual interest costs—more than the entire U.S. defense budget projected for 2026.
The growing expense means a larger portion of federal revenue is being used simply to service existing debt rather than fund infrastructure, education and other investments.
Debt Creates a Growing Interest-Expense Cycle
Higher interest costs can create a difficult cycle for the government. As more money is needed to cover interest payments, the government may need to borrow even more, increasing the overall debt burden.
The Kobeissi Letter, citing Congressional Budget Office projections, noted that interest expense as a share of federal revenue has roughly tripled since 2015.
The CBO projects that interest costs could consume approximately 25% of federal revenue by 2036.
“The US debt crisis is in uncharted territory,” the Kobeissi Letter said, while noting that its projections assume there is no major slowdown, recession or significant increase in Treasury yields.
Why Today’s Debt Burden Is Different From 1991
The current situation is particularly significant because the U.S. is facing a much larger debt load than it did during the previous record in 1991.
At that time, debt held by the public was roughly 44% of GDP. Today, debt held by the public has surpassed $32 trillion, exceeding 100% of GDP, according to the figures cited in the analysis.
That means even interest rates that appear relatively normal by historical standards can have a much greater impact on the federal budget.
DoubleLine analysts argued that the U.S. government has reached a record interest burden even though long-term Treasury yields remain well below the levels seen in previous decades.
AI Borrowing Adds Pressure to Bond Markets
Another complication is the growing demand for capital from major technology companies.
Hyperscalers and other AI-focused companies issued roughly $225 billion in bonds during the first half of 2026 as they finance massive investments in artificial intelligence infrastructure.
Many companies are increasingly turning to long-term debt markets, including bonds with maturities of 10 to 30 years.
Economist Ed Yardeni has argued that money flowing into corporate bonds can reduce the amount of capital available for Treasury securities, potentially forcing the U.S. government to offer higher yields to attract buyers.
That dynamic could further increase borrowing costs for the federal government.
Treasury Takes Steps to Support the Bond Market
The Treasury Department has also taken steps to support demand and liquidity in the longer-dated Treasury market.
Treasury Secretary Scott Bessent doubled the size of Treasury buybacks of 10- to 30-year bonds, increasing them from $2 billion to at least $4 billion per operation.
The move surprised some investors and highlighted the growing sensitivity of the bond market to changes in supply, demand and interest rates.
For DoubleLine analysts, the combination of large federal deficits and heavy private-sector demand for capital makes long-term Treasury yields increasingly important.
A Growing Fiscal Challenge for Washington
The central concern is not simply the current level of interest rates, but the size of the debt on which those rates are being applied.
With interest payments already consuming a record share of federal revenue, even modest increases in Treasury yields could put additional pressure on the U.S. budget.
As borrowing continues and interest expenses rise, policymakers face a difficult balancing act between servicing existing debt and finding room for future government spending and investment.
