President Trump’s calls to lower interest rates have intensified in recent days, and with good reason. Annual interest payments on the U.S. national debt have surged to $1.2 trillion over the past 12 months, highlighting the precarious fiscal state of the world’s largest economy.
According to The Kobeissi Letter, a financial markets commentator, interest expenses have surpassed healthcare and defense spending by approximately $300 billion.
“Interest costs are also now the second-largest government expense, just $300 billion below Social Security,” the commentator said.
Interest payments currently account for 18% of all federal tax revenue, just shy of the record 19% seen in the 1980s, when interest rates reached historic highs of nearly 19%.
“Interest on federal debt is our biggest crisis,” The Kobeissi Letter warned.
Washington’s soaring interest payments are being driven by two key factors: persistent fiscal deficits and the Federal Reserve’s reluctance to cut interest rates amid ongoing inflation concerns.
Many economists have warned that the deficit could grow even larger if President Trump’s proposed “Big, Beautiful Bill” is enacted. Given these risks, the president is unlikely to convince Fed Chair Jerome Powell to cut interest rates soon.
Trump vs. Powell
President Trump’s latest tirade against Fed Chair Jerome Powell came earlier this month, when he took to social media to label Powell a “numbskull” and a “dumb guy” for refusing to cut interest rates.
Trump argued that rates should be no higher than 2%, implying more than 200 basis points of cuts from current levels. He also claimed the U.S. has “virtually no inflation” and that “our economy is doing really well.”
Powell, however, sees things differently.
Following the Federal Reserve’s recent decision to leave interest rates unchanged, Powell said the central bank is “well positioned to wait.”
He warned of potential stagflation risks as economic growth slows and tariff-related inflation pressures return.
“Everyone that I know is forecasting a meaningful increase in inflation in coming months from tariffs because someone has to pay for the tariffs,” Powell said during a press conference, noting that those costs will likely fall somewhere along the supply chain — whether on manufacturers, exporters, importers, or retailers.
The central bank’s next policy meeting is scheduled for July 29–30, though traders expect that any meaningful chance of a rate cut may not materialize until the following meeting in September, according to CME Group’s FedWatch Tool.
The September meeting will also unveil the Fed’s latest projections for GDP, unemployment, inflation, and interest rates.
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