EDITORIAL · 20 Jun 2026 · 11:29 GMT ·9 min read

USA: Richest Country, Biggest Debtor. Why Trillion-Dollar Interest Payments Now Threaten Social Security and Medicare

The United States is the wealthiest country on Earth but also its biggest debtor.

NEUTRALITY 94 · BALANCED· 12 sources

The United States is the wealthiest country on Earth but also its biggest debtor. By June 2026, the national debt topped $39 trillion. For the first time, the government spends more on paying interest on debt than it does on defending the country. This exact same budget funds Social Security and Medicare, and both are running out of cash. Here is how a single ledger ties the national debt straight to your retirement check.

The Staggering Cost of Interest:

One number reframes the entire economic picture. The United States Treasury reports that the federal government paid $970 billion in net interest on the debt during fiscal year 2025, which ended on September 30, 2025. This interest bill beat out national defense spending by roughly $53 billion. Today, only Social Security and major health programs take up more room in the federal budget.

The Congressional Budget Office (CBO) projects that net interest will cross $1 trillion in fiscal year 2026 and hit $2.1 trillion by 2036. In 2025, 19 cents of every tax dollar went straight toward paying interest instead of funding the programs voters actually chose.

A Shrinking Safety Net:

The squeeze on the safety net runs through this exact same budget, and time is running out. On June 9, 2026, the Social Security Board of Trustees warned that the fund paying retirement and survivor benefits will run dry in 2032. Once depleted, the program can only pay out what it takes in from current payroll taxes. The Trustees estimate this equals just 78 percent of scheduled benefits. Unless Congress acts, every recipient faces a 22 percent cut. Similarly, Medicare's fund for inpatient care is expected to be empty by 2033. After that point, it will only cover 89 percent of its costs.

President Donald Trump dances on stage after delivering remarks during a campaign and economic policy event in the Eugene Levy Fieldhouse at SUNY Rockland Community College on May 22, 2026 in Suffern, New York. Media source: Fortune

Demographic Arithmetic:

The root cause is basic math. Social Security and Medicare rely on taxes from the current workforce. According to the Bipartisan Policy Center, five workers paid into the system for every retiree back in 1960. Today that ratio is just 2.9. The figure keeps falling as baby boomers retire and Americans live longer. With fewer workers supporting more retirees, these programs spend more than they earn. The cash reserves built up over decades are simply draining away.

Two Sides of One Ledger:

The rising interest bill and the looming benefit shortages are not competing issues. They are interconnected pressures on the exact same ledger. Ultimately, the politicians arguing over solutions disagree less about the raw numbers and more about who should pay to fix them.

Context

The Cheap Debt Era

To understand why interest costs exploded, look at how the government finances its debt. The Treasury borrows money by selling securities and pays buyers whatever interest rate they demand. For a decade after 2008, those rates were incredibly low. Even a massive pile of debt was cheap to carry.

The Rate Shock

That changed after 2021. To fight the sharpest inflation in 40 years, the Federal Reserve aggressively raised interest rates through 2022 and 2023. The cost of new and rolled-over government debt skyrocketed. The result is obvious in the budget. Net interest spending surged from $375 billion in fiscal year 2019 to $970 billion in fiscal year 2025. According to the EPIC for America budget tracker, that is a 2.5-fold increase in just six years.

A Bipartisan Mountain of Debt

The national debt kept growing the entire time, and both political parties built it. The Committee for a Responsible Federal Budget (CRFB) tallied the receipts. During his term, President Donald Trump approved $5.9 trillion in net spending increases alongside $2.5 trillion in tax cuts. President Joe Biden later approved $4.3 trillion in net spending increases. A massive chunk of this debt passed with bipartisan support. Bipartisan votes accounted for 77 percent of Trump's added debt and 29 percent of Biden's.

The 2025 Tax Squeeze

A recent tax law pulled the Social Security deadline even closer. The 2025 "One Big Beautiful Bill Act" cut taxes that some beneficiaries pay on their Social Security checks. The Bipartisan Policy Center notes this change choked off revenue flowing into the trust fund. Because of this, the 2026 Trustees report moved the projected fund depletion date to late 2032, which is one full quarter earlier than previously expected.

The Demographic Trap

Meanwhile, a demographic squeeze has been building for decades. Designed in 1935, Social Security operates as a pay-as-you-go system where today's taxes fund today's benefits. This works flawlessly when the working population outpaces retirees. It breaks down when the retirees outnumber the working population. Unfortunately, the reverse has been happening ever since baby boomers started retiring in the 2010s.

Flaws in the Formula

Two long-standing rules made the gap even worse:

1. Wage Indexing: Rules adopted in 1977 tie initial benefits to average national wages. Since wages usually rise faster than prices, each new wave of retirees gets a larger real benefit.

2. The Tax Cap: The payroll tax only applies to wages up to a yearly cap, which is set at $184,500 for 2026. Because high-earner salaries grew faster than this cap, the taxable wage base shrank. The Bipartisan Policy Center reports the share of all wages subject to the tax dropped from 90 percent in 1983 to just 83 percent in 2026.

A Deepening Hole

By 2026, the long-term outlook grew even darker. The Social Security trustees lowered their expectations for future birth rates and immigration. According to the Bipartisan Policy Center, this pushed the projected 75-year shortfall to a staggering $30.3 trillion. Just one year prior, that projection was $26.1 trillion. The cash reserves that once masked this massive gap are now draining fast.

Supportive perspectives

Media Source: Epic for America

Fiscal conservatives and deficit hawks
The interest bill is crowding out everything else, and only spending restraint can stop it
This camp includes the Committee for a Responsible Federal Budget (CRFB) and the House Budget Committee's Republican majority. They argue the danger is no longer theoretical because the numbers have already arrived. The government now spends more on interest than on national defense, all non-defense discretionary programs combined, or Medicaid (the healthcare program for low-income individuals). Only two programs remain larger than the interest bill: Social Security and Medicare (the federal healthcare program primarily for seniors). The CRFB projects that interest will pass Medicare in 2029 and overtake Social Security to become the absolute largest line item by 2047. Their core case is simple. Every dollar spent on interest is a dollar that buys zero roads, zero military carriers, and zero social benefits. Therefore, the responsible path is to slow spending growth before interest completely swallows the budget.
Progressives and defenders of the benefit programs
Social Security and Medicare did not cause the debt and should not be cut to pay for it
The Center on Budget and Policy Priorities and many congressional Democrats argue that the safety net is being blamed for a massive hole that tax cuts and wars helped dig. Their strongest point is structural. By law, Social Security is barred from borrowing. Therefore, it cannot add a single dollar to the federal debt the way general spending does. While they acknowledge the shortfall is real, they note it is limited. Even after 2032, payroll taxes will still cover 78 percent of benefits. They argue the fairer fix is to raise revenue rather than slash benefits. A prime example is removing the $184,500 wage cap so high earners pay taxes on more of their income. With average benefits sitting at just $2,017 a month, many retirees depend on these checks entirely.
The bond market and mainstream economists
The debt is financeable today, but the trajectory is what has to change
The Congressional Budget Office (CBO) and mainstream economists take the middle ground. The United States is not facing an imminent default and retains the deepest, most trusted government bond market in the world. Their case for action is about the steep slope ahead rather than an immediate cliff. The CBO projects that public debt will rise from 99 percent of the economy at the end of fiscal year 2025 to a record-breaking 120 percent by 2036. Rising interest costs account for a massive chunk of that climb. This camp argues that acting now allows for gradual, painless adjustments. Borrowing remains relatively cheap today, but delaying action risks severe economic shocks forced by markets demanding higher rates.
The view that the alarm is overstated
A sovereign borrower is not a household, and economic growth can carry the load
Economists at the Center for Economic and Policy Research reject the crisis framing entirely. Regarding Social Security, they point out that the worker-to-retiree ratio has been falling for 60 years while living standards actually rose. Because productivity growth allows fewer workers to produce more, a shrinking ratio does not automatically doom the program. On the national debt, they argue that the United States borrows in a currency it issues and controls. This eliminates the forced-default risks that smaller economies face. While interest costs reached 3.2 percent of the economy in 2025, they note this is high but not unprecedented. Ultimately, they believe the burden can be carried by a growing economy rather than by harsh austerity measures that might actually choke off growth.

Critical perspectives

Of the fiscal conservatives and deficit hawks
The math does not close on spending cuts alone, and the record undercuts the messenger
While fiscal conservatives demand spending cuts to solve the debt crisis, critics argue their math simply does not work. The programs these hawks refuse to touch, which are Social Security, Medicare, and defense, make up the vast majority of the budget. Trying to stabilize the debt purely by cutting the remaining small slice of discretionary spending is mathematically nearly impossible. Furthermore, opponents point out that this same conservative coalition has repeatedly voted to drain government revenues. The CRFB tallied $2.5 trillion in net tax cuts approved under President Trump. To their critics, this proves that the conservative camp actively widened the exact financial gap they now complain about.
Of the progressives and defenders of the benefit programs
Refusing to discuss benefits guarantees the across-the-board cut no one wants
While progressives fiercely defend the safety net and demand revenue-only solutions, the Bipartisan Policy Center warns this stance is dangerous. If Congress does absolutely nothing to adjust the system, the law automatically imposes a brutal 22 percent cut on every recipient in 2032. Taxing high earners is a popular idea, but credible estimates show it cannot fully close a staggering $30.3 trillion shortfall on its own. A revenue-only stance still leaves a massive gap. The harsh reality is that by refusing to negotiate on benefits, defenders of the status quo are effectively choosing the worst possible outcome by default.
Of the bond market and mainstream economists
"Stabilize the trajectory" can become an excuse to never act
The centrist framing of "stabilizing the trajectory" sounds highly reasonable, but critics argue it often produces total political paralysis. Deficit hawks argue this middle-ground approach drastically understates how fast interest is compounding, especially with the CBO projecting net interest to double to $2.1 trillion within a decade. Meanwhile, skeptics say it overstates the risk just to justify cutting vital social programs. The shared criticism from both sides is that a warning about 2036 rarely forces politicians to take a hard vote today. As a result, the gradual adjustments this camp prefers are delayed until they are no longer gradual.
Of the view that the alarm is overstated
Bounded risk is not costless, and the deadline is brutally real for retirees
Those who view the debt alarm as overstated rely heavily on economic growth and currency control to save the day, but the CBO and the Trustees push back hard against this optimism. They argue that controlling our currency does not mean our choices are free of consequences. The trust fund depletion dates are not theoretical abstractions. A worker turning 62 in 2026 will reach full retirement age exactly when the 2032 shortfall hits. An automatic benefit cut would brutally impact low-income retirees who have zero outside savings. Furthermore, rising interest payments are already eating up money that could be spent on other programs today. A country issuing its own currency can still face crippling inflation and spiked borrowing costs if global markets lose confidence, which is precisely the risk this comfortable view ignores.