Credit card bills in the U.S. are piling up, and they’re becoming quite significant.
This year’s federal deficit has reached $2 trillion, which is the highest mark since the early pandemic days when the government was spending heavily on health measures and supporting workers and businesses.
However, this figure isn’t just about government spending habits—over $1 trillion of that deficit consists of interest payments on the nation’s staggering $40 trillion debt, according to Treasury data for the 2026 fiscal year that ended on September 30.
A leading economist has pointed out that bond markets are starting to lose confidence in the ongoing borrowing cycle. This shift could lead to increased borrowing costs for the U.S., setting off what he describes as a “vicious cycle.”
Payments on the debt now exceed the military budget, ranking just behind Social Security and Medicare in overall government expenditure.
Currently, interest payments consume over 3% of the nation’s GDP, which is more than during the 1940s and nearly as high as it was in the 1990s when a deficit crisis heightened political tensions.
If it weren’t for the net interest payments on the national debt, the deficit could be less than half, around $940 billion.
According to Mark Zandi, chief economist at Moody’s Analytics, “A vicious cycle threatens to take hold, with higher rates adding to the interest payments and debt load, which in turn pushes rates up even more,” he cautioned in a recent online statement.
Zandi highlighted that while many nations are also trying to manage their borrowing, the size of the U.S. economy makes this situation notably significant.
Economists like Zandi emphasize that it’s crucial to look beyond the total public debt figure and focus on the U.S. debt-to-GDP ratio instead.
“It’s arguably more significant that global investors are starting to notice this and are demanding higher interest rates to cover the growing risks,” Zandi mentioned.
The 10-year Treasury yield has reportedly increased by about a percentage point this year, one of the largest hikes compared to other major economies. Typically, countries carrying the heaviest interest burdens see the most substantial increases.
One cannot help but recall that the last time interest costs were this high was during President George H.W. Bush’s administration, a period that unfolded when he had to backtrack on his “Read my lips, no new taxes” promise as part of a bipartisan effort to reduce the deficit.
That broken commitment is often cited as a key factor in Bush’s defeat by Bill Clinton in the 1992 Presidential Election.
