The Republicans’ “big beautiful” budget package is uniting everyone from Elon Musk to Wall Street over an issue that experts say could pose a threat to the nation’s long-term fiscal stability: the rising cost of servicing the U.S. government’s growing mountain of debt.
The U.S. spent $1.1 trillion in interest on its debt in 2024 — almost double the amount it was paying five years ago, according to Federal Reserve Bank of St. Louis data. The nation now spends more on interest payments than it does on defense, data from the Stockholm International Peace Research Institute shows.
Those costs could rise even more under the Republican tax and spending bill now being considered in the Senate, according to a June 5 analysis by the Congressional Budget Office. The version of the tax bill passed by the House last month is projected to increase the federal deficit — the gap between what the federal government spends each year and what it collects in revenue — by $2.4 trillion over the next decade, the nonpartisan agency found.
That would require the government to raise additional debt, resulting in additional interest payments of about $550 billion over the next decade, the CBO forecasts. By 2035, interest on the nation’s debt could reach $1.8 trillion, according to the Committee for a Responsible Federal Budget, a nonpartisan think tank focused on fiscal issues.
“The interest costs now are bigger than defense spending, which is an extraordinary,” Chris Edwards, an expert on federal tax issues at the Cato Institute, a libertarian-leaning think tank, told CBS MoneyWatch. “The budget threat here is that all of these increasing federal interest costs will crowd out all the other priorities in the federal budget that the policymakers want to spend on.”
In other words, the federal government could struggle to support vital programs like Social Security as a larger share of its budget is eaten up by interest payments on the nation’s swelling debt.
Federal interest payments as a share of the nation’s gross domestic product stood at 3% last year, according to Federal Reserve Bank of St. Louis data. If current trends holds, that could rise to 4.1% of GDP by 2035, the nonpartisan Peter G. Peterson Foundation estimates.
Democrats have pointed to analyses showing the bill’s tax cuts will benefit wealthier Americans far more than low- and middle-income workers while also adding to the national debt.
“No single piece of legislation in my time here in Congress will do more to add to the national debt than this one,” Rep. Brendan Boyle, a Democrat from Pennsylvania who voted against the legislation, said last month on the House floor.
Many Republicans, however, point to the bill’s proposed tax cuts as providing an avenue for economic growth. “We are going to celebrate a new golden age in America,” House Speaker Mike Johnson said last month after the bill passed in the House.
Concerns from Elon Musk, Wall Street
The cost of paying for the nation’s debt has drawn concern from many corners, including Tesla CEO Elon Musk, who earlier this month posted about it on social media as he voiced his objections to the GOP bill.
“Congress is spending America into bankruptcy!” Musk posted on June 5, pointing to data showing that interest payments have risen from $416 billion in 2014 to more than $1 trillion in 2024.
Moody’s Ratings downgraded U.S. credit last month, citing among its reasons the mounting concerns about the nation’s increasing debt load and interest payments.
“Successive U.S. administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs,” the credit rating agency said. “Over the next decade, we expect larger deficits as entitlement spending rises while government revenue remains broadly flat.”
Moody’s added, “In turn, persistent, large fiscal deficits will drive the government’s debt and interest burden higher.”
On June 7, the White House said in a memo that the GOP tax bill “significantly improves our nation’s fiscal trajectory by including $1.7 trillion in mandatory savings,” while President Trump’s tax cuts will spur economic growth.
Some economic forecasters project that Mr. Trump’s tariffs will drag down U.S. growth. The nation’s growth could slide to 1.6% in 2025 and 1.5% next year partly because of those import levies, a sharp reduction from the 2.8% growth recorded last year, the Organization for Economic Cooperation and Development said last week.
How did interest payments get so big?
In recent years, interest payments on the federal debt have ballooned for two main reasons. First, a series of COVID-related spending bills provided $4.6 trillion to individuals and businesses to help them keep afloat during the pandemic, with much of that funding financed through the issuance of new government debt.
Second, the Federal Reserve started hiking interest rates in March of 2022 to tame high inflation. But that also meant the Treasury Department needed to pay higher rates to bondholders, adding to the cost of servicing the nation’s burgeoning debt.
In 2020, the U.S. had about $27 trillion in outstanding debt, according to Treasury data. By 2024, that had jumped 32% to $35.5 trillion. Over that time, the Fed’s benchmark interest rate rose from close to zero percent to a high of more than 5% in 2024.
One reason the Republican budget bill is forecast to increase the deficit — and add to the nation’s interest costs — is that it would extend President Trump’s 2017 tax cuts, as well as add other breaks, such as eliminating taxes on worker tips and overtime pay.
Altogether, those tax cuts will cost $3.75 trillion, the CBO estimates. The revenue loss would be partially offset by nearly $1.3 trillion in reduced federal spending elsewhere, namely through Medicaid and food assistance. But that still leaves a significant funding gap.
In the meantime, the U.S. could face a financial strain in servicing its debt, especially in the face of an economic slowdown, experts have warned.
“The most dangerous scenario is that the giant size of our debt precipitates a U.S., and even global, economic recession and financial crisis,” Cato’s Edwards told CBS MoneyWatch. “We saw this 15 or so years ago in Greece and some other European countries. That sort of crisis could be coming to the United States at some point, but no financial expert knows exactly when that’s going to be.”
