# Net Interest on the Debt **OMB budget function 900** — the cost of servicing the accumulated national debt, and the budget's fastest-rising structural pressure. **~$0.97 trillion in FY2025** (function basis); on the narrower CBO "net interest on the public debt" measure it **crossed $1 trillion for the first time in FY2025** ($1,028B). Net interest has roughly **tripled since FY2019** (~$375B) and now **exceeds national defense** — a historic inversion. ## Why it exploded Two forces compounded: a **larger debt stock** (deficits of $1.4–1.8T every year add to the principal) and **higher interest rates** (the Fed funds rate peaked at 5.25–5.50% in 2023–24, so maturing low-rate debt rolls over at much higher cost). Unlike other spending, interest is **non-discretionary in the deepest sense** — it is a contractual obligation on debt already issued. There is no committee that appropriates it and no program to cut; the only levers are the deficit (which sets how much new debt is added) and rates (set by markets and the Fed). ## What the market is charging (August 2026) The rate half of that equation is not an abstraction — it is priced at auction every month, and in August 2026 it set a **25-year record**. - **Aug 13, 2026 — 30-year bond auction, $25 billion, high yield 5.216%.** The **highest 30-year auction yield since 2001**. The 30-year had already surpassed a 19-year record the prior month and is trending **above 5.2%**. - **Demand was weak, not just expensive.** **Bid-to-cover 2.39** and **primary dealers absorbing 11.5%** of the issuance — both below their trailing-12-month averages — and the awarded yield came in **above the prevailing "when-issued" yield**, the standard tell that demand undershot expectations. Dealers are the buyers of last resort; a rising dealer share means real-money buyers stepped back. - **The 10-year has been above 4.6% for nearly a month** — more than **40 basis points above CBO's projections**. **That 40bp gap is the mechanism.** Every net-interest projection in this vault — CBO's $1T+ baseline, GAO's net interest approaching 10% of GDP by 2056 — is built on a rate path the market is currently pricing *above*. Interest costs do not overshoot because anyone decided to spend more; they overshoot because roughly $30 trillion of publicly held debt reprices at whatever the auction clears at, and the auction keeps clearing higher than the scorekeepers assumed. The **stock** is tracked on [[Federal Deficit and National Debt]]; this is the **price**. The feedback loop closes on itself: larger deficits mean more issuance, more issuance tests demand, weaker demand means higher yields, higher yields mean larger interest outlays, and larger interest outlays mean larger deficits. See [[Federal Budget FY2026]] for the flow side of the same year. ## The RWKB angle Net interest reframes the entire fiscal debate. Every "we can't afford it" argument against social spending runs into the fact that the single fastest-growing line is the **interest on past tax cuts and past deficits** — including the [[Tax Cuts and Jobs Act]] and the [[Big Beautiful Bill]], which add to the debt that interest is paid on. It is the strongest evidence for the **[[Federal Deficit and National Debt]]** case and, simultaneously, the strongest evidence against the claim that [[DOGE]]-style discretionary trims can fix the problem: you cannot cut your way out of a number driven by the debt stock and rates. ## Sources - CBO, *Monthly Budget Review: July 2026* (Aug 10, 2026) — net interest and outlay detail. - TreasuryDirect, 30-year bond auction results, **Aug 13, 2026** (high yield 5.216%, bid-to-cover 2.39, primary dealer share 11.5%). - CRFB, "Treasury Auction Yield Hits Highest in 25 Years" (**Aug 14, 2026**) and "The 10-year Treasury Yield Eclipsed 4.6%" (Jul 21, 2026). - GAO-26-108610, *The Nation's Fiscal Health* (June 2026) — long-run net-interest share of GDP. ## Related - [[Federal Deficit and National Debt]] · [[National Debt Timeline]] · [[Debt Ceiling]] - [[Defense Spending Landscape]] (now smaller than interest) · [[Budget Functions]] - [[Federal Budget FY2025]] · [[Budget Hub]]