|
The U.S. government spends a lot of money. Some of that spending is covered with taxes, tariffs, and other sources of revenue. When that’s not enough, the government borrows the money it needs to operate.
The U.S. borrows money by issuing U.S. Treasury bills, notes, and bonds. When a person, company, or country buys a U.S. Treasury, they are lending the government money. In return, the United States agrees to pay interest for a specific period of time and then return the amount borrowed.
The interest the United States pays on Treasuries is a lot like the interest people pay on outstanding credit card balances. The higher the debt, the more interest is owed.
U.S. interest costs are growing
Officially, the U.S. government’s spending year begins in October, which can be confusing. The period from October through December 2025 is known as the first quarter of Fiscal Year 2026 (FY26).
Over that period, Fiscal Data reported the federal government:
- Spent $1.83 trillion,
- Collected $1.22 trillion, and
- Ran short by about $602 billion.
In FY26, the government spent more on interest on the national debt (+13%), and Social Security and Medicare (+9%). It spent less on the Environmental Protection Agency (-81%), Department of Homeland Security/FEMA disaster relief (-38%), Department of Education (-26%), and Department of Agriculture (-18%).
For context, in FY 2025 (the period from October 1, 2024, to September 30, 2025), the U.S. government:
- Spent $7.01 trillion,
- Collected $5.23 trillion, and
- Ran short by $1.78 trillion.
Higher interest costs mean less money for other priorities
As interest costs rise, they tend to “crowd out opportunities for investment in other important priorities. In fact, the [United States] government is already spending more on interest costs than on education, research and development, and infrastructure combined. If unaddressed, the growing borrowing costs will pose significant challenges for the nation’s fiscal future,” reported the Peter G. Peterson Foundation.
| 
