Trillion annually as watchdog flags rising risks 1″> emmitt barryWorthy News Washington DC Bureau Chief
(Qualified News) – The federal government has yet to meet its massive borrowing needs – but a new report from the U.S. Government Accountability Office (GAO) warns that rising debt and rising interest costs are posing long-term risks to the country’s financial stability.
In a March 2026 review of federal debt management, GAO found that the U.S. Treasury Department has adapted to the growing deficit by expanding the size and frequency of its debt auctions. Strong investor demand has so far allowed the government to finance its obligations without disruption.
“Investor demand for Treasury auctions remains sufficient for Treasuries to meet the government’s borrowing needs,” the report said.
However, the report highlights troubling trends beneath the surface.
Federal borrowing has increased dramatically over the past decade. In fiscal year 2025 alone, the Treasury refinanced approximately $9.1 trillion in existing debt and borrowed an additional $1.9 trillion to cover the deficit and maintain cash balances.
At the same time, the cost of servicing that debt is increasing at a historic pace. Interest payments on debt held by the public are set to reach nearly $1 trillion in fiscal year 2025 – more than spending in key categories like national defense.
GAO warned that increased interest rates combined with persistent deficits could push those costs even higher in coming years. If investor demand weakens or lending rates rise further, the government may be forced to offer higher yields, increasing financial stress.
To help stabilize borrowing costs, the watchdog stressed the importance of maintaining a broad and diverse investor base, including both domestic and foreign participants. This diversity has been an important factor in maintaining demand for US credit.
Nevertheless, the agency stressed that long-term solutions require action from Congress. It reiterated previous recommendations and urged lawmakers to develop a comprehensive fiscal strategy and reform the debt ceiling process by linking borrowing decisions directly to spending and revenue policies.
As of February 2026, those recommendations were not addressed.
With debt levels continuing to rise and interest costs reaching unprecedented levels, GAO’s warning highlights a critical moment for policymakers as they confront the country’s increasingly unsustainable fiscal path.
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