Scope Ratings says interest costs now drive US debt toward 160% of GDP

Take interest out of the Committee for a Responsible Federal Budget's year-end tally and the fiscal 2026 primary deficit comes to about $900 billion, or 2.8% of GDP ^[18]. Interest made up 55% of the gap ^[19]. Scope puts the primary deficit higher, near 3.5% of GDP, and expects it to hold there while debt-servicing costs drive further deterioration ^[2]. The two sources also count debt differently. Scope's 160% projection is general government debt, while the CRFB's 100% of GDP is federal debt held by the public ^[3][13].

On rates, the current 10-year is 0.97 points above the CBO's assumption for 2028 to 2031 and 0.87 points above its figure for the years after ^[20]. Both gaps are close to the one-point overshoot in the CRFB scenario ^[9]. Spread evenly across ten years, the CRFB's $3.5 trillion comes to about $350 billion a year, roughly a third of fiscal 2026's interest bill ^[21]. Scope expects net interest to reach what it called an "exceptionally high" level by 2031 ^[17]. "This trajectory points to an unsustainable medium-term fiscal path and leaves the sovereign increasingly exposed to shifts in market sentiment and financing conditions," Scope said ^[4].

Treasury's financing choices tighten the link to the market. Borrowing short avoids the higher rates that long bonds carry ^[10]. It also means more debt comes due sooner, and each rollover costs more when yields spike ^[11]. Treasury is, in effect, declining to lock in ten-year money at 5.27% ^[8][10]. The buyers are less patient as well: price-sensitive hedge funds have taken a bigger share of the $32 trillion market from foreign central banks, which were steadier holders ^[12].

Yields could fall back toward the CBO path, and the CRFB overshoot would shrink with them ^[9]. Growth could come in stronger, the one route besides fiscal adjustment that Scope names ^[3]. Or the debt limit could move markets before the interest bill does. "While Scope's baseline assumes that policymakers will ultimately agree to raise or suspend the debt limit, the post-midterm political landscape could increase the scope for prolonged partisan standoffs," Scope said ^[6]. Its AA- sits two notches below the AA+ grades from Moody's, Fitch and S&P ^[1]. Fitch's chief sovereign analyst said in January that another US downgrade so soon after its 2023 action would be highly unusual, according to Investing.com ^[16].

I think the interest reading holds on these numbers. With a primary deficit Scope calls stable, the part of its 160% path that moves is the cost of carrying the debt ^[2][3]. The counter-case is in the same material. Scope also blames "structural expenditure pressures" and limited political will for reform ^[7], and the CRFB said it expects interest payments to run much higher and tariff revenue lower from here, and that this could push deficits and debt well past the CBO's projections ^[14]. Revenue and spending still move. A 10-year held near 4.4% for several years would remove the overshoot behind the CRFB's $3.5 trillion and would undercut the view ^[8][9].