A proposed surge in US defence spending could add nearly $7 trillion to the national debt over the next decade, according to new analysis from a fiscal watchdog group, raising fresh concerns about the trajectory of federal finances.
The White House is preparing to release its Fiscal Year 2027 budget request, which centres on a historic increase in defence spending to $1.5 trillion. The announcement comes just weeks after the national debt crossed the $39 trillion threshold, a milestone that has drawn alarm from across the political spectrum.
The Committee for a Responsible Federal Budget (CRFB), a nonpartisan fiscal watchdog, estimates that boosting the defence budget by the anticipated amount would increase total defence discretionary spending by $5.8 trillion between FY2027 and 2036. Once interest costs are factored in, the total addition to the debt climbs to $6.9 trillion. The group revised its projection upward from an earlier estimate, citing an expanded budget window and higher prevailing interest rates.
The scale of the increase would mark the largest year-over-year jump in defence spending since the Second World War.
Federal Reserve Chair Jerome Powell addressed the debt situation at a recent event before roughly 400 Harvard economics students. While he does not consider the $39 trillion debt load immediately dangerous, he warned that the current path demands urgent attention.
“The level of the debt is not unsustainable, but the path is not sustainable,” Powell said. “It will not end well if we do not do something fairly soon.”
He drew a sharp distinction between the stock of debt and its rate of growth. “What is clear is that our debt is growing much faster — the federal government debt is growing substantially faster than our economy. And that ratio is going up. In the long run, that is kind of the definition of unsustainable.”
Interest payments now outpace defence
The numbers behind Powell’s concern paint a stark picture. Net interest payments on the national debt are projected to exceed $1 trillion in fiscal year 2026 — nearly triple the $345 billion paid in 2020. In just the first three months of the current fiscal year, interest costs reached $270 billion, already surpassing defence spending for the same period.
The Congressional Budget Office projects that debt held by the public will surge from 101 percent of GDP today to 120 percent by 2036, eclipsing the post-Second World War record.
Powell placed the responsibility squarely with Congress. “We do not have to pay the debt down,” he said. “We just need to have primary balance and begin to have the economy actually growing more quickly than the debt.”
He also acknowledged, with dry candour, that his warnings about the debt — consistently repeated over his decade at the central bank — have largely been ignored by lawmakers.
The fiscal squeeze ahead
Whether lawmakers act on the CRFB’s recommendations to offset the defence buildup remains uncertain. The arithmetic is unforgiving: layering nearly $7 trillion in additional debt on top of a $39 trillion base, at interest rates that are materially higher than a few years ago, narrows the margin for error considerably.
The tension is clear. Defence advocates argue that geopolitical threats demand increased investment in military readiness. Fiscal conservatives counter that doing so without corresponding spending cuts or revenue increases accelerates a trajectory that multiple experts now describe as unsustainable.
As the budget request moves forward, the debate over how to balance national security priorities with long-term fiscal stability will only intensify.