JEC Brief: Interest payments could consume 55 percent of federal receipts outside of payroll taxes by 2036
WASHINGTON, DC – A new brief from the Joint Economic Committee (JEC), titled “Federal Interest Spending Could Now Exceed Half of Available Tax Receipts in Ten Years,” highlights the growing threat rising interest rates pose to the nation's fiscal stability by consuming more than half of available federal tax receipts by 2036. With the national debt exceeding $40 trillion, new Congressional Budget Office (CBO) estimates show that higher interest rates could drive up federal borrowing costs, add trillions to federal deficits and accelerate interest spending, pushing the United States toward an increasingly unsustainable fiscal trajectory. The brief warns that rising borrowing costs, compounded by the nation's growing debt, could trigger a fiscal crisis, making immediate spending restraint increasingly urgent.
“We are rapidly approaching a fiscal reality where more than half of federal receipts outside of payroll taxes could go toward servicing our debt by 2036,” said JEC Chairman David Schweikert. “Under this higher interest rate scenario, we could spend $23 trillion on interest alone over the next decade. That is spending not on Social Security, not on Medicare, not on national defense, but simply paying for yesterday’s borrowing. When interest costs are growing nearly three times faster than the economy, the math becomes impossible to ignore. Every dollar we borrow makes us more vulnerable to higher interest rates and leaves fewer resources for everything else. We are approaching a debt spiral that could become mathematically impossible to escape and the window to avert a full-blown fiscal crisis is rapidly closing.”
Key findings from the brief:
- Interest payments could consume 55 percent of federal receipts excluding payroll taxes by 2036. Under CBO's higher-rate scenario, net interest spending would reach 55.4 percent of available tax receipts by 2036, compared with 38.1 percent under CBO's baseline projection. Even under the lower-rate scenario, interest spending would consume 43.6 percent of available tax receipts.
- Higher interest rates could add $6 trillion to the national debt over the next decade. Based on CBO projections, interest rates 150 basis points above its February 2026 baseline would increase cumulative federal deficits by $6 trillion through 2036. Recent forecasts and Treasury market data suggest interest rates could remain elevated, underscoring the risks outlined in CBO's higher-rate scenarios.
- Rising borrowing costs threaten long-term fiscal sustainability. With approximately $10 trillion in marketable debt maturing within the next year, refinancing at higher rates could significantly increase federal borrowing costs. Under the higher-rate scenario, total net interest spending would reach $23.2 trillion through 2036, consuming approximately 31 percent of projected federal receipts. Annual interest spending would grow at an average rate of 10.8 percent, far outpacing projected economic growth of 3.9 percent and growth in receipts excluding payroll taxes of 4.1 percent.
Read the full brief here.
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