GAO warns rising deficit could push annual interest payments on national debt past $1T

The federal government is managing to meet its massive borrowing needs for now, but warning signs are emerging as debt levels climb and interest costs surge, according to a new report from the U.S. Government Accountability Office.

The independent, nonpartisan agency in its new report also cautions that growing reliance on debt could eventually strain investor demand and push borrowing costs higher.

In its March 2026 review of federal debt management, the GAO – known as the "congressional watchdog" – found the Treasury Department has adapted to rising deficits by expanding the size and frequency of its debt auctions, while maintaining steady interest from a broad range of investors.

“Investor demand for Treasury auctions remains sufficient for Treasury to meet the government’s borrowing needs,” the report states.

The report also highlighted a sharp increase in federal borrowing over the past decade. In fiscal 2025 alone, Treasury refinanced about $9.1 trillion in maturing debt and borrowed an additional $1.9 trillion to cover the deficit and manage cash balances.

The report indicates that higher rates and a larger debt load are pushing federal interest payments higher than ever before. Interest expense on the debt held by the public reached about $1 trillion in fiscal year 2025, 

"Elevated interest rates combined with large deficits would add to the government’s interest costs, which were larger than $970 billion in fiscal year 2025. These annual interest costs exceeded spending for some of the largest federal programs and areas, including national defense," reads the report.

The GAO warns that continued growth in borrowing could further increase those costs, particularly if investor demand weakens or interest rates rise.

The watchdog recommends that Treasury continue to preserve and broaden its diverse investor base, which has been a key strength of the market. 

Strong participation from domestic and foreign investors, as well as different types of financial institutions, will help stabilize borrowing costs, the GAO concludes.

"GAO has previously recommended that Congress (1) have a strategy to address the nation’s unsustainable fiscal path (GAO-20-561) and (2) replace the current debt limit process with an approach that clearly links decisions on debt to decisions on revenue and spending (GAO-15-476)," reads the report. 

"Addressing these risks would help ensure the continued broad-based demand for Treasury securities and support Treasury’s goal of financing the government at the lowest cost over time. As of February 2026, Congress has not yet taken the recommended actions," the report also states.