The US debt service exceeds one trillion dollars annually for the first time

The tax burden from interest on federal debt has reached unprecedented levels. In just six years, annual interest payments tripled: from $345 billion in 2020 to over $1 trillion in 2025 and early 2026. This exponential growth reflects both the increase in national debt and the tightening of financing conditions in capital markets.

U.S. National Debt Soars in Two Decades

The trajectory of U.S. borrowing shows a marked acceleration curve. In 2006, federal debt was below $10 trillion. A decade later, in 2017, it had reached $20 trillion. By 2021, the level exceeded $30 trillion, and in February 2025, according to The Kobeissi Letter, it hit $38.5 trillion. From 2020 to that point, debt increased by $15.3 trillion, with an average growth rate of $6.3 billion per day. Projections suggest the level could approach $40 trillion just months after February 2025.

This growth rate is remarkable when viewed historically. It took over two centuries for U.S. national debt to surpass $1 trillion for the first time, a milestone reached in October 1981. However, in recent years, the system has accumulated additional debt at a pace that makes this historic figure achievable in less than a year.

Interest Payments Surge: The Burden on the Federal Budget

Debt service payments have become one of the most significant items in the federal budget, surpassing traditionally dominant categories like defense. In 2020, these expenses totaled $345 billion; six years later, they exceed $1 trillion annually. The Committee for a Responsible Federal Budget has characterized this situation as a new standard of permanent spending.

Per capita, the additional debt accumulated since 2020 amounts to about $285,733 per U.S. household. Meanwhile, in 2025, the government added around $6 billion daily to the national debt, equivalent to approximately $2.2 trillion in a calendar year.

Money Supply and Policy Responses

The Federal Reserve has continued expanding the M2 money supply, which reached $22.4 trillion according to data from the Federal Reserve Bank of St. Louis. Since the Trump administration, measures have been implemented to slow the debt-to-GDP ratio. These include increases in trade tariffs and the Department of Efficiency (DOGE) initiative, which reported $202 billion in savings since its launch, translating to $1,254.66 per U.S. taxpayer.

In January 2025, President Trump signed the so-called “One Big Beautiful Bill,” a fiscal package projected to cost $3.4 trillion over a decade through tax cuts and new public spending. Tariff revenues increased from $7 billion in 2025 to $25 billion by mid-2026, though they still account for less than 0.07% of the total accumulated debt.

International Actors: Who Finances U.S. Debt

The composition of U.S. debt holders remains concentrated among key foreign actors. Japan remains the largest foreign creditor, holding over $1.1 trillion in Treasury bonds according to recent Treasury Department data. The United Kingdom has surpassed China to become the second-largest holder, with holdings around $800 billion, reflecting London’s role as a global financial intermediary and securities custodian.

This international debt distribution highlights reliance on external financing to sustain current federal spending levels. The fact that two allied nations together hold more than $1.9 trillion in U.S. bonds underscores both international confidence in the U.S. ability to pay and the limited availability of comparable large-scale foreign currency investment alternatives.