The federal government spends more money than it collects in taxes every year. To cover that gap, it borrows, as it has for almost all of the nation’s history. A new report from the Government Accountability Office (GAO) examines how the U.S. Treasury Department manages that borrowing. GAO finds that Treasury is doing its job competently, which is encouraging—but the hole keeps getting deeper. No surprises here, but some of the specifics are sobering.

When the government needs cash, the Treasury Department sells IOUs to investors—ordinary people, banks, pension funds, and foreign governments—in the form of Treasury securities. Treasury holds hundreds of these auctions every year. In fiscal year 2025 alone, it held 444 auctions, borrowing $1.9 trillion in new money and refinancing another $9.1 trillion of debt coming due. To put that in perspective, $9.1 trillion in a single year is more than the entire federal budget.

The interest rate the government pays is set by what investors demand at auction. Historically, investors have accepted relatively low rates on Treasury securities because they are considered among the safest, most liquid investments in the world—the financial equivalent of keeping money under a very large mattress with a little bit of interest to boot.

The federal government now owes more than $31 trillion to the public. This differs from roughly $39 trillion in total federal debt, which includes money the government has effectively borrowed from itself—for example, from the Social Security and Medicare trust funds. The $31 trillion figure reflects only debt held by outside investors and is what must be financed in financial markets. Debt held by the public has been rising by more than $1 trillion annually for years, and the Congressional Budget Office projects budget deficits will average more than $2 trillion per year through 2036.

All that borrowing comes at a cost, obviously. In fiscal year 2025, the federal government spent more than $970 billion on interest alone—roughly on par with national defense. GAO projects that interest costs will grow faster than the overall economy for decades.

Of all the risks GAO identifies, the most avoidable is the statutory debt limit—the legal cap on how much the federal government can borrow. The debt limit does not prevent Congress from spending money; it only prevents Treasury from borrowing to pay for spending Congress has already approved.

GAO has twice called on Congress—first in 2015 and again in 2024—to replace the current debt limit with a process that directly links borrowing to decisions about spending and revenue. In other words, if Congress votes to spend more than it raises, that vote should also authorize the necessary borrowing. The current system decouples those decisions, creating recurring standoffs over debt that threaten the full faith and credit of the U.S. Treasury and the promise that Treasury securities are safe investments. Brinksmanship over raising the debt limit imposes real costs on taxpayers with no fiscal benefit. That’s why TCS has called for abolishing the debt limit.

Here are the big takeaways from GAO’s latest report:

Interest rates are rising. The average rate on Treasury securities was 3.4 percent at the end of fiscal year 2025, up from just 2 percent in 2014. That difference may sound small, but on $31 trillion of debt, even a 1-percentage-point increase adds roughly $310 billion per year in interest costs.

Bigger auctions are hurting demand. GAO finds that as auction sizes grow, investors bid less aggressively, demanding higher rates to absorb the additional supply. Treasury is flooding the market with IOUs, and buyers are insisting on a better deal.

Foreign investors are pulling back. Foreign governments and institutions once held nearly half of all Treasury securities; by September 2025, that share had fallen to about one-third. The U.S. dollar’s share of global reserves has also declined, from 72 percent in 2001 to 58 percent in 2024. If the dollar’s dominance erodes further, foreign demand for Treasury securities could fall, pushing rates higher.

And the debt limit circus makes it worse. Each time Congress flirts with not raising the cap—even to pay for spending it has already approved—it injects risk into what is supposed to be the safest asset in the world. If investors begin to take that risk seriously, taxpayers will pay the price in permanently higher borrowing costs.

So, Treasury is doing its job, but the bigger picture is exactly what GAO’s fiscal outlook makes clear—our budgeting is fundamentally out of whack, debt is growing faster than the economy, interest costs are compounding, and without a real fiscal strategy, the pressures on taxpayers and the broader economy will only intensify.