Interest on the Debt Now Tops Defense Spending
Greg Fleming has spent nearly four decades navigating Wall Street's worst moments — negotiating Merrill Lynch's 2008 fire sale, then building Rockefeller Capital Management into a $200 billion wealth empire rooted in John D. Rockefeller's original 1882 family office. When a manager of that pedigree says the national debt leaves him 'stunned,' the market should listen.
In a Bloomberg Wealth interview with David Rubenstein, Fleming named the fiscal situation as his primary concern for the U.S. economy. 'It's a fantastic amount of money to have borrowed, even for an economy this robust and this big,' he said, describing a national debt now approaching $40 trillion.
The milestones are no longer abstract. The debt crossed $39 trillion in mid-March, and net interest payments are projected to exceed $1 trillion in fiscal year 2026 — nearly triple the $345 billion the government paid in interest in 2020. By April, debt held by the public had crossed 100% of GDP for the first time since World War II. Brookings economist Jessica Riedl has calculated that ratio could climb to 137% within a decade, a trajectory that would surpass the postwar peak and stay there indefinitely.
Fleming underscored a figure that has become a rallying point for fiscal hawks: the federal government now spends more on interest payments than on national defense. He had predicted in October 2023 that threshold would arrive by 2027. It became a 'permanent' fixture of the federal budget by 2024 — years ahead of schedule.
'We're still at relatively full employment,' Fleming told Rubenstein. 'We have been in a good time. We run these 5, 6, 7% of GDP deficits annually, and there seems to be no impetus to change that.'
AI is not the silver bullet. Fleming had previously floated the possibility that artificial intelligence might help the U.S. grow its way out from under the debt. By the time of the Rubenstein interview, that optimism had narrowed. AI adoption is 'moving faster than even I thought,' he said, and could have a disinflationary effect — but it is 'one variable among several,' competing against an energy shock and unchecked deficit spending. Recent St. Louis Fed research, analyzing nearly 490,000 corporate earnings calls, found a spike in AI-related productivity mentions but almost no corresponding signal in macroeconomic data.
Fleming also noted that the debt picture makes the job of new Fed Chair Kevin Warsh especially complicated, with fiscal deficits that 'clearly could put pressure on rates, particularly on the long end.'
His concern is not isolated. A 2024 industry survey found that 48% of financial advisors ranked the national debt as America's 'most urgent' policy problem — above immigration, tax policy, and geopolitical conflict.
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Fleming stopped short of predicting a crisis and said he remained bullish on long-term U.S. wealth creation. But the editorial point writes itself. A man who counsels the wealthiest families in America on living within their means and avoiding excessive leverage applied that same lens to Washington — and found the verdict uncomfortable. The taxpayer is the silent co-signer on every dollar of that $40 trillion, and the interest bill alone now crowds out the very defense spending that underwrites American sovereignty. When the cost of past borrowing exceeds the cost of protecting the country, the administrative state has crossed a line that no productivity boom can quietly paper over. Capital rewards clear rules and sound balance sheets. Right now, Washington is offering neither.
