2023 Interest Costs Reach $659 Billion
According to final data from the Treasury Department, net interest costs reached $659 billion (2.5 percent of GDP) in fiscal year 2023, a $184 billion increase from the previous year. In this piece, we explain that:
Interest is currently the fastest growing part of the federal budget. After growing from $221 billion in 2013 to $345 billion in 2020, it has nearly doubled to $659 billion in 2023. Relative to the economy, net interest costs grew from 1.6 percent of GDP in 2020 to 2.5 percent in 2023.
This huge increase is due in part to the $9.5 trillion increase in debt held by the public between the beginning of 2020 and the end of 2023. But it is also due to much higher interest rates. Newly issued ten-year Treasury Notes paid an average of 3.8 percent in fiscal year (FY) 2023, compared to 2.4 percent in 2019 and 1.1 percent in 2020. Newly issued three-month Treasury Bills paid an average yield of 5.0 percent in 2023, compared to 2.3 percent in 2019 and 0.7 percent in 2020. Rates today are even higher.
At $659 billion, interest was the fourth largest government program in 2023, exceeded only by Social Security, Medicare, and defense. The federal government spent significantly more on interest than all spending on children. Interest costs also exceeded spending on Medicaid, veterans, food and nutrition services, and more.
