US Federal Spending on Interest Since 1900

Federal government spending on interest at the start of the 20th century was less than 0.2 percent of GDP and went all the way down to 0.04 percent GDP by 1917. It vaulted to 1.33 percent of GDP in the aftermath of World War I, and then settled down to 0.7 percent of GDP by 1929. In the Great Depression of 1929-33 interest spending increased to 1.15 percent GDP, but it was back down to 0.6 percent GDP by 1942. With World War II interest outlays increased to 1.7 percent GDP in 1946 and then settled down to about 1.2 percent GDP through the 1950s and 1960s until 1973. The response to inflation in the mid to late 1970s drove interest outlays to almost 3 percent of GDP in 1984 and stayed at about 3 percent of GDP through 1996. In the late 1990s and early 2000s interest outlays dropped sharply, bottoming out at 1.3 percent GDP in 2004. Fighting the real-estate bubble in the late 2000s drove interest expense up to 1.7 percent GDP in 2008, but in the 2010s interest expense came down to 1.3 percent GDP before increasing to 1.76 percent in 2019.

US Federal Interest since the Founding

Federal spending on interest in 1792 was nearly 1.4 percent GDP. But by 1810 it was down to about 0.3 percent GDP. But the War of 1812 brought interest spending up to nearly 0.9 percent GDP and then declined to zero in the 1930s. The Mexican War jogged interest spending up to 0.15 percent GDP in 1849. Then interest spending declined to 0.04 percent by 1858.

The Civil War caused a sharp peak in spending on interest to 1.71 percent GDP in 1867. After the Civil War spending on interest gradually declined. It dropped to 1.4 percent of GDP in 1872 and below 1 percent of GDP in 1880 and below 0.5 percent GDP in 1883. Thereafter, federal spending on interest declined to 0.04 percent GDP just before World War I.

World War I caused a peak of interest spending at 1.3 percent GDP; World War II caused a peak of 1.7 percent GDP in 1946. Fighting inflation in the 1980s pushed interest expense to 3 percent GDP. In the 2000s and 2010s spending on net interest fluctuated mostly below 1.5 percent of GDP.

CBO Forecast for Federal Interest Spending

According to the latest forecast from the Congressional Budget Office, federal spending on net interest will grow from a little over 1.8 percent of GDP in 2019 to over 8 percent of GDP by 2050.