Federal net interest outlays were $970 billion in FY2025, or 3.2% of gross domestic product (GDP). In the Congressional Budget Office’s February 2026 baseline, they rise to a projected $1.0 trillion in FY2026—less than total mandatory spending, but more than any mandatory program other than Social Security or Medicare. By FY2036, CBO projects net interest will reach $2.1 trillion and nearly equal all discretionary spending.
What “debt-service costs” measure
Here, debt service means the federal government’s net outlays for interest, not repayment of the principal balance of federal debt. CBO defines net interest as interest paid on debt held by the public, minus interest income the government receives. Interest payments between federal accounts, such as payments to trust funds, are intragovernmental transactions and do not affect the budget deficit. This net budget measure is the appropriate one to compare with other federal outlays.
It is not interchangeable with Treasury’s gross interest transactions or broader accrual-based measures used in federal financial reporting. Those measures can use different definitions and accounting treatments.
FY2025 actual spending: $970 billion
CBO reported that net interest outlays totaled $970 billion in FY2025, equal to 3.2% of GDP. That is an actual result, not a forecast. In the same fiscal year, Social Security and Medicare together made up more than one-third of federal spending and, combined, exceeded discretionary spending.
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How net interest compares with FY2026 spending
CBO’s February 2026 baseline projects total federal outlays of $7.4 trillion in FY2026, or 23.3% of GDP. The component figures show how interest compares with the two broad budget categories and with individual programs:
| FY2026 category or measure | CBO February 2026 baseline | How to read the comparison |
|---|---|---|
| Net interest | $1.0 trillion; 3.3% of GDP | Projected interest outlays, net of interest income received by the government. |
| Mandatory outlays | $4.5 trillion | More than four times projected net interest in total. CBO says net interest exceeds mandatory spending on any single program except Social Security or Medicare. |
| Discretionary outlays | $1.9 trillion | Projected net interest is a little over half of total discretionary outlays. |
These categories are not governed in the same way. Mandatory outlays generally follow statutory eligibility and benefit rules; discretionary spending is set through appropriations. Interest costs arise from outstanding debt. The comparison describes their scale and budget treatment—it does not mean that an extra dollar of interest automatically removes a dollar from a particular program.
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What CBO projects through FY2036
In CBO’s February 2026 baseline, net interest rises to a projected $2.1 trillion in FY2036, or 4.6% of GDP, nearly matching all discretionary spending. Total federal outlays are projected to reach $11.4 trillion, or 24.4% of GDP. CBO attributes the higher outlay share to growth in Social Security and Medicare and rising net interest, partly offset by discretionary outlays declining as a share of GDP.
CBO projects net interest outlays to grow by an average of 7.5% annually over the longer-run baseline. For FY2026, it attributes most of the projected increase in interest outlays to growth in debt held by the public, which it projects will rise 6.4% from FY2025 to FY2026. These are projections under CBO’s baseline assumptions and the laws in place on January 14, 2026—not guaranteed outcomes.
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Net interest is a large and growing budget category, but the totals alone do not establish which other spending would change in response. Mandatory programs, discretionary appropriations and interest have different legal and budgetary mechanics. CBO’s figures compare projected outlays; they are not a dollar-for-dollar account of specific programs being displaced.
For estimates of how proposed revenue or outlay changes could affect interest costs, deficits and debt relative to its baseline, CBO provides the How Changes in Revenues and Outlays Would Affect Debt Service, Deficits, and Debt: 2026 to 2036 tool. It also includes projected effective rates on new borrowing and related Treasury yields. The results are approximate and baseline-based, rather than a simple fixed multiplier for every policy change.
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Sources and time frames
- CBO, The Budget and Economic Outlook: 2026 to 2036, February 2026 — baseline projections and definitions of outlays.
- CBO, CBO Releases Infographics About the Federal Budget in Fiscal Year 2025, March 30, 2026 — FY2025 reported budget results.
- CBO, How Changes in Revenues and Outlays Would Affect Debt Service, Deficits, and Debt: 2026 to 2036 — baseline-based estimation tool.
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