The United States government has paid out a significant amount in interest on its national debt, with the total reaching $1.05 trillion in the last year. This substantial payment has contributed to a federal deficit of $2 trillion, the highest since the COVID-19 pandemic.
What happened
The interest payments on the $40 trillion debt are now larger than the defense budget and are only surpassed by Social Security and Medicare in terms of total government spending. According to economists, the debt-to-GDP ratio is a significant concern, as global investors are demanding higher rates to compensate for the mounting risk. The 10-year Treasury yield has increased by about a percentage point this year, one of the biggest increases among major economies.
Economists warn that the situation could create a vicious cycle, where higher interest rates add to the interest payments and debt load, which in turn pushes rates up even more. The total US public debt has surged by a third in less than five years, surpassing $40 trillion for the first time.
