By Jose Navarro, MBA | The Navarro Report
September 2026
WASHINGTON, D.C. Somewhere in the federal budget sits a line item that no committee chairman defends, no agency requested, and no voter ever chose. It is interest on the national debt, and eleven months into fiscal year 2026 it has passed $1 trillion.
Treasury data analyzed by the Peterson Foundation shows interest payments through August totaled $1.02 trillion, up 9 percent from $933 billion at the same point last year. On that tally, interest trails only Social Security among federal spending categories. In 2022 the annual bill was $476 billion. It has roughly doubled since.
The trajectory should command attention in Congress. The Congressional Budget Office projects net interest climbing from about $1 trillion this year to $2.1 trillion in 2036, a cumulative $16.2 trillion over the decade. Relative to the economy, interest already exceeds 3 percent of GDP, a postwar record, and CBO expects 4.6 percent by 2036. By then, interest would consume roughly one of every four dollars the government collects.
The squeeze is already visible in the ratios. Interest absorbed 18.5 percent of federal revenue at the end of last year, above the previous high set in 1991, and CBO’s path reaches 25.8 percent by 2036. Interest is also projected to claim 15.7 percent of all federal spending by 2029, passing the 1996 record of 15.4 percent. Those percentages are room Congress will not have when the Social Security retirement trust fund, which CBO expects to be exhausted in 2032, demands attention.
I have spent more than two decades as a financial controller, and I know how this looks from inside an organization. When debt service grows faster than revenue, no serious board treats it as background noise. It becomes the first agenda item, because every dollar committed to lenders is a dollar unavailable for the mission. Washington has done the opposite. It has treated the fastest growing line in the budget as an afterthought.
The budget process explains why. Interest is paid automatically. It never appears in the annual appropriations fight that absorbs Congress each fall, so no subcommittee marks it up, no witness defends it, and no amendment can trim it. Lawmakers argue over discretionary programs while the largest growing obligation compounds without a vote.
This month offered a fresh illustration. The House passed a stopgap spending bill, 370 to 48, funding agencies into early December and removing the shutdown threat until after the midterm elections. The vote was pragmatic, and it spared federal workers and contractors another paycheck crisis after a record 43-day shutdown last fall. It also confirmed the pattern. The House has passed only three of the twelve appropriations bills for fiscal year 2027, and the cost of carrying the debt itself has barely entered the debate.
Nor is this simply a quirk of high interest rates. Even setting interest aside, Washington spends more than it collects. CBO projects the annual deficit widening from $1.9 trillion this year to $3.1 trillion in 2036, while the national debt approaches $40 trillion. Every deficit dollar borrowed today raises the interest bill that future budgets must pay before funding anything else. The arithmetic is not partisan, and it is not optional.
A workable response does not require agreement on the size of government. It requires better instruments. Three reforms are feasible under current rules.
First, every spending and tax bill should carry a published CBO estimate of its effect on interest costs, printed on the first page. Lawmakers routinely cite what a bill costs. They should also state what it adds to the debt service that follows.
Second, Congress should adopt an explicit target for interest as a share of revenue and trigger a mandatory review whenever the ratio breaches it. Lenders and corporate boards rely on such thresholds because they force a conversation before a crisis rather than after one.
Third, budget resolutions should open with the primary deficit, the gap that exists before interest, and set a credible path for stabilizing debt relative to the economy. Whether that path runs through spending restraint, revenue, or a mix of both is a legitimate argument between the parties. Having no path at all is not.
The consequences of delay are substantial. Each year of inaction enlarges the principal on which interest accrues, narrows the room for defense, health care, infrastructure, and everything else voters expect from government, and leaves the country more exposed if rates rise. Lenders will eventually make the decision that lawmakers avoid.
A trillion dollars a year is no longer a warning on the horizon. It is this year’s invoice, and it will arrive again next year, larger. Congress has the tools to act now, while the choices are still its own. The remaining question is whether Congress will address it deliberately or wait for the bond market to do it instead.
Sources
Peterson Foundation, Interest Costs on the National Debt (Treasury data through August 2026)
Congressional Budget Office, The Budget and Economic Outlook: 2026 to 2036
Bipartisan Policy Center, The Fiscal Outlook in CBO’s Latest 10-Year Baseline
Defense One, House passes stopgap spending bill (September 2026)
Jose E. Navarro, MBA, is a financial controller and founder of The Navarro Report, a public finance and government accountability publication based in San Diego, California. He has more than two decades of experience in public finance, nonprofit management, and government contract compliance.
Contact: jose@navarro-report.com | 850-291-3175