Living in Fiscal Fantasyland

Adam Kobeissi is a trader who authors a weekly financial newsletter on global capital markets. While the newsletter is only available to subscribers, Kobeissi provides a teaser of its content through his X account. He broke news about the explosive growth of the amount of interest the U.S. government has to pay on the national debt over the Labor Day holiday weekend:

BREAKING: US annual interest expense is up to a record 18.5% of federal government revenue.

This is officially above the previous record of 18.4% set in 1991.

This percentage has more than QUADRUPLED over the last 4 years as interest expenditures on public debt skyrocketed.

US… pic.twitter.com/kR67EBlde1

— The Kobeissi Letter (@KobeissiLetter) August 31, 2026

The composition of the U.S. government’s debt is heavily weighted in favor of short-term Treasury bills and notes instead of longer-term bonds. Because it is, the chart Kobeissi features isn’t reflective of the interest rate that Uncle Sam is paying on the nation’s total public debt outstanding.

For that information, we can turn to the U.S. Treasury’s fiscal data site, which features a graph showing the U.S. government’s annual interest expense from 2010 through 2026. It also indicates the average interest rate the federal government pays on the entire national debt.

For 2026, the U.S. Treasury Department projects it will pay $1.27 trillion just on interest at an average interest rate of 3.49%.

The government’s interest expense is so large as a percent of its tax receipts largely because politicians exploited low interest rates during the coronavirus pandemic to run up the national debt with big spending programs. Spending that far exceeded the cost of dealing with the pandemic itself. Spending they falsely claimed was affordable because the government’s budget deficit was lower than its pandemic peak and because interest rates were so low. They foolishly believed those extremely low interest rates could last forever.

They were living in fiscal fantasyland.

The excessive spending hasn’t been stopped yet. The federal government is still burdened by this increased spending, running deficits in the trillions as a result. It will take acts of Congress to bring spending back under control with effective fiscal reforms. Reforms are now being blocked by the politicians who want the excessive spending to continue.

They are still living in fiscal fantasyland.