Why the National Debt Matters
The charts in this section display official government budget projections through 2056 from the Congressional Budget Office (CBO), The Long-Term Budget Outlook Data: 2026 to 2056. The series includes FY2025 actuals and CBO’s 30-year projections for FY2026–2056.
Key Takeaways
- The National Debt Is Expensive for Taxpayers: The national debt incurs high interest costs, diverting taxpayer funds from more productive uses to pay interest to bondholders.
- The National Debt Burdens Economic Growth: Net interest outlays are projected to consume 24.8% of federal outlays and equal 6.9% of GDP in FY2056.
- Debt Imposes Unfair Costs on Future Generations: Future taxpayers are on the hook to pay for public services being consumed by today's taxpayers. To afford this, young people and future generations will have to accept some combination of higher taxes, higher inflation, and reduced federal government services.
- The Debt Is Becoming Unaffordable: The current debt, interest payments, and projected reliance on debt in the coming years increase the risk of even higher borrowing costs, and potentially long-term insolvency and even default.
Debt Is Expensive
The national debt comes at an increasingly high cost. To fund federal spending beyond its revenue capacity, the government must borrow from private markets, which entails paying interest on the borrowed money.
In FY2025, net interest payments on the national debt accounted for 3.2% of GDP and nearly 14% of total federal outlays.
CBO projects net interest payments on the national debt to rise to 6.9% of GDP by 2056, exceeding Social Security’s share of the budget and eating up nearly one-quarter of total federal spending.
Federal Spending Projection
Spending by major category as a share of GDP, FY2025 actual and FY2026–2056 projected
Debt Burdens Economic Growth
The national debt is a drain on the country’s economy. Like taxes or tariffs, it demands funds that could have been used more efficiently by the private sector, but are instead directed toward government consumption, distorting market signals, reducing productivity, and slowing overall economic growth.
Federal spending financed by debt rather than taxes represents an even larger impediment to economic growth because taxpayers must pay not only for the spending but also the interest on the national debt. This results in even higher long-term costs to taxpayers than if the government had simply raised taxes.
Key Takeaways
- Economic Uncertainty: The rising national debt is increasingly creating uncertainty about future government actions, including the need to pay down the debt through potential tax increases and service cuts, as well as the risk of driving up inflation.
- Crowding Out Capital: Government borrowing competes with the private sector for capital, raising borrowing costs for households and businesses.
Federal Debt Held by the Public: GDP-Share Projection
Federal debt held by the public as a share of GDP, FY2025 actual and FY2026–2056 projected
Debt Imposes Unfair Costs on Future Generations
The growing national debt—driven by spending exceeding revenues, primarily for major health care programs and Social Security—will require future generations to pay for services consumed today.
As the federal government accumulates more debt, a larger portion of future budgets will be dedicated to paying interest on previous borrowing and spending, leaving less room for future productive government spending.
As a result of rising debt costs, discretionary federal spending, which includes spending on defense, education, infrastructure, and other annually appropriated programs, is forecast to fall from about 27% of federal outlays in FY2025 to about 17% by FY2056.
Federal Spending Composition Projection
Share of federal outlays by category, FY2025 actual and FY2026–2056 projected
The National Debt Is Becoming Unaffordable
The federal government is projected to run increasingly larger annual budget deficits, with seemingly no expectation of ever balancing the federal budget or running a surplus in coming decades.
As debt grows, a larger share of government spending goes to interest payments, limiting the ability to scale back borrowing. The increased need for credit and growing market skepticism over the federal government's long-term creditworthiness can drive interest rates higher.
The United States spent $970 billion on net interest in FY2025. CBO projects that figure to grow to $2.1 trillion by FY2036 and approximately $6.6 trillion by FY2056.
The fact that most federal spending is non-discretionary only worsens the situation, as there is limited flexibility to adjust course.
Federal Deficit Projection
Annual federal deficit as a share of GDP, FY2025 actual and FY2026–2056 projected