U.S. national debt reached 100.2% of Gross Domestic Product (GDP) at the end of March, marking the first time the country’s debt has exceeded the size of the economy since World War II. Data from the Bureau of Economic Analysis shows publicly held debt stood at $31.27 trillion, slightly outpacing the $31.22 trillion in nominal GDP recorded over the prior 12-month period.
Interest costs vs. defense
Rising interest payments are now a primary driver of the federal deficit, creating a scenario where the U.S. spends more on debt servicing than on national security. In the first half of fiscal year 2026, interest payments on public debt reached $529 billion, surpassing the $461 billion spent on defense and $70 billion spent on education combined.
- The deficit. The federal government is currently spending $1.33 for every dollar it collects in revenue.
- Total liabilities. The U.S. government ended fiscal 2025 with $47.78 trillion in liabilities against $6.06 trillion in assets.
- Future projections. Interest costs are expected to reach $2.1 trillion by 2036, when publicly held debt is projected to hit 120% of GDP.
The Congressional Budget Office notes that while the primary deficit—the gap between revenue and spending excluding interest—is expected to remain stable at roughly 2% of GDP, the total deficit will widen as borrowing costs climb. This "fiscal dominance" may constrain the Federal Reserve's ability to hike interest rates to fight inflation, as higher rates significantly increase the cost of managing the existing debt stock.
A costly restocking effort for munitions depleted during the conflict with Iran and a proposed $1.5 trillion annual Pentagon budget have sparked internal debate over further deficit expansion. Congressional Budget Office forecasts indicate that by the 2030s, federal borrowing costs may begin to outpace nominal economic growth.
