U.S. interest costs hit $1.25 trillion, consuming nearly one-fifth of federal revenue

Investment firm Doubleline reports that the U.S. paid $1.25 trillion in net interest in 2025, equal to 18.5% of total federal revenue and exceeding the previous record set in 1991. The debt, now around $40 trillion and more than double the size of GDP, means a larger share of the budget is devoted to interest, creating a borrowing spiral that squeezes fiscal flexibility. Analysts note that while bond yields are not at historic highs, the sheer scale of the debt makes the government far more sensitive to rate changes.

Meanwhile, major tech firms, especially AI-focused hyperscalers, have issued billions in long-term bonds, pulling capital away from Treasuries and pushing yields higher. Treasury Secretary Scott Bessent responded by doubling the size of Treasury buybacks for 10- to 30-year bonds, a rare direct market intervention. Economists warn that without a slowdown or a rise in yields, interest costs could climb to 25% of revenue by 2036, further straining the budget.