The calendar may still have a few weeks left in 2025, but in Washington the numbers already reflect fiscal year 2026—and the interest tab is climbing fast. In just nine weeks, the Treasury has shelled out a 12-figure sum simply to service the national debt.
Because the federal government runs on a fiscal calendar that ends in September rather than December, the new budget year is already well underway. Treasury data shows that in the first nine weeks of fiscal 2026, the government has spent $104 billion on interest tied to its $38 trillion debt load. That works out to more than $11 billion every week and already accounts for about 15% of all federal outlays so far this year.
Ideally, the new fiscal year would come with a fresh resolve: either slow the pace of borrowing and the interest costs that follow, or boost revenues enough to blunt the damage.
President Trump and his team have been talking more openly about the debt challenge. Economists may see some of the administration’s tactics as unconventional, but the White House has nonetheless rolled out revenue ideas—most notably tariffs—that are projected to raise roughly $3 trillion through fiscal 2035. Even so, that total comes in about $1 trillion below what the Congressional Budget Office estimated earlier this year.
The question is how much of that tariff income will actually go toward shrinking the debt. Current projections suggest duties could generate $300 billion to $400 billion per year, enough to cover only a slice of the more than $1 trillion in annual gross interest payments expected in 2025. On top of that, President Trump has promised to distribute part of the tariff windfall directly to the public in the form of a $2,000 “dividend” for each person—a move the Committee for a Responsible Federal Budget estimates would cost about $600 billion every year.
Even as new money flows in, the borrowing binge is not letting up. The Peterson Foundation, which advocates for more disciplined fiscal policy, recently analyzed the Treasury’s quarterly refunding outlook and concluded that overall borrowing is set to climb. The government is expected to issue $158 billion more in debt during the first half of this fiscal year than it did over the same period last year.
Debt Tops the Risk List for 2026
Deutsche Bank’s latest macroeconomic outlook paints an upbeat picture for the global economy next year. The bank forecasts worldwide growth of 3.2% in 2026, with U.S. output projected to rise by 2.4%. Fading trade tensions and fresh tax cuts from Trump’s “One Big Beautiful Bill” Act are expected to give households and businesses an extra boost.
But large and persistent deficits threaten to undercut that optimism. Deutsche Bank warns that many countries are running sizeable budget gaps while having limited room to maneuver on fiscal or monetary policy. A structural pivot toward more active fiscal support in 2026, it argues, will widen those deficits further and intensify concerns about whether today’s debt levels are sustainable.
The United States stands out in these assessments. The bank expects the U.S. deficit in 2026 to hit 6.7% of GDP, with the potential to grow even larger if tariff revenues fall short or if lawmakers push through additional, targeted spending that unnerves investors. At the same time, Congress faces a tight timetable to resolve disagreements over health care subsidies and annual spending bills before the next temporary funding measure runs out on January 30.
Tapping the Great Wealth Transfer
Lawmakers may also be counting on a long-term shift in private wealth to help steady public finances. Over the next two decades, an estimated $80 trillion is expected to move from older generations to younger ones in the so-called Great Wealth Transfer, according to UBS. Some analyses put the figure as high as $124 trillion.
UBS chief economist Paul Donovan sees this as a potential opening for governments looking to shore up their balance sheets. “Governments have long mobilized private wealth to support public finances,” he told reporters at a briefing last month. That can take several forms. One approach is to nudge market behavior by encouraging people to buy government bonds through incentives such as tax-advantaged premium bonds, which channel household savings directly into financing the state. Prudential rules can likewise steer pension funds toward domestic government debt—as happened in the U.K. after 1945, when a debt-to-GDP ratio of around 240% was gradually reduced over time.
Donovan added that more controversial tools are also on the table, including wealth-focused levies like capital gains and inheritance taxes. In practice, though, governments typically start with what he calls financial repression—using tax breaks or regulation to funnel money into government bonds—before moving more explicitly toward taxing wealth itself.
