The U.S. government has spent over $1 trillion this year on interest payments for its $35.3 trillion national debt, as reported by the Treasury Department on Thursday. With the Federal Reserve maintaining benchmark rates at their highest in 23 years, the government has allocated $1.049 trillion for debt service, a 30% increase from the same period last year and part of an estimated $1.158 trillion in payments for the entire year.
After deducting the interest earned on its investments, net interest payments have reached $843 billion, surpassing all categories except Social Security and Medicare. The rise in debt service costs coincided with a surge in the U.S. budget deficit in August, nearing $2 trillion for the year.
As the federal government’s fiscal year nears its end, the August deficit increased by $380 billion, a significant change from the $89 billion surplus in the same month the previous year, primarily due to accounting adjustments related to student debt forgiveness. This brought the 2024 deficit close to $1.9 trillion, marking a 24% rise from the same point a year ago.
Although the Fed is expected to reduce rates next week by a quarter percentage point, Treasury yields have declined in anticipation of further adjustments in the coming months. The benchmark 10-year note recently yielded around 3.7%, a decrease of over three-quarters of a percentage point since early July.
