Markets · The hall
Interest now costs more than the Pentagon
In fiscal 2025 the United States paid $970 billion in net interest on the public debt. Defence cost $893 billion. The bond market is now a larger federal programme than the armed forces.
- Net interest
- Defence
- US net interest, FY2025 (CBO)
- $970bn
- Defence outlays, FY2025
- $893bn
- Interest as a share of GDP
- 3.2%
- Debt held by the public / GDP
- 99%
A crossing that used to be unthinkable in peacetime
CBO, 30 March 2026: in fiscal 2025 the federal government spent $970 billion on net interest and $893 billion on defence. Interest was 3.2% of GDP, above the 1991 high. Debt held by the public finished the year at 99% of GDP. This is not a wartime spike. It is the arithmetic of a $36 trillion gross debt meeting coupon rates that are no longer zero. Pair it with The $348 trillion ledger. The world-stock number is abstract. This one is a line item that now outruns the Pentagon.
Defence did not shrink. The bill next to it grew
Defence outlays rose every year on this chart. Interest rose faster, because the stock of debt grew and the Fed’s hiking cycle repriced it. 2020–21 look calm only because rates were crushed; the principal was already there. 2024 is the year interest first rivalled defence (~$882bn vs ~$850bn). 2025 is the year it won. Mandatory spending ($4.2 trillion) remains the real giant. Interest is the one that compounds without a vote.
The long view is crowding-out as a strategy, not an accident
A state that spends more servicing yesterday than defending tomorrow will still defend — until a new crisis arrives and the bond market sets the increment. Rearmament, grids, and ageing all queue behind this coupon. Investors who treat Treasuries as a risk-free allocation and defence as a separate theme are looking at one budget. Own some duration as a regime choice. Own the things the coupon is crowding: munitions, grids, the tax base. Do not assume 2015’s $223 billion interest bill is coming back.
Investing lens
Horizon 3–10 years · Educational, not advice
US net interest is now a larger programme than defence. Size duration as a regime, not a default. The crowding-out is the theme: quality cash-flow, some hard insurance, and the physical programmes that still get appropriated.
Where the map points
- Short-to-intermediate Treasuries rather than blind longs
- Defence and munitions with appropriated backlog
- Gold as policy insurance (see official reserves)
- Equities that can live with a 3%+ real funds rate
What can break it
- A growth shock that rallies bonds and makes this chart look hysterical
- Financial repression that caps coupons by law
- CBO’s interest path assumes current law — it always does
CHART does not recommend securities, funds or trades. Figures can be revised by their publishers. Do your own research and consider regulated advice before allocating capital.
Sources
Every headline number traces to a named publisher. Contextual sources inform the essay, not the key stat.
- 01PrimaryCongressional Budget Office2026-03-30The Federal Budget in Fiscal Year 2025: An Infographic
FY2025: net interest $970 billion; defense $893 billion; nondefence discretionary $980 billion; mandatory $4.2 trillion; deficit $1.8 trillion (5.8% of GDP); debt held by the public 99% of GDP.
- 02PrimaryInternational Monetary Fund2026-04Fiscal Monitor, April 2026: Fiscal Policy under Pressure
Global public debt just under 94% of GDP in 2025; 100% by 2029.
- 03CorroboratedInstitute of International Finance2026-02Global Debt Monitor
Nearly $29 trillion added in 2025; total global debt a record $348 trillion.
Keep reading
The $348 trillion ledger
Private and public debt set a record in 2025. Sovereign debt is heading back to 100% of world GDP — earlier than the IMF thought.
$348 tn
Global debt stock, end-2025 (IIF)
The rearmament decade
World military spending hit $2.89 trillion in 2025. America spent less. Europe and Asia spent enough more to keep the global total rising.
$2.89 tn
World military expenditure, 2025
Hard money, soft reserves
Central banks have been buying on the order of 1,000 tonnes of gold a year. Valuation, not tonnes, did most of the $3 trillion mark-up.
$4.5 tn
Official gold holdings, 2025 (IMF)