Washington ignores the true cost of legislation by neglecting the interest expense associated with increasing deficits. The omission overstates “savings” when spending programs merely grow more slowly. This is “Washington Math,” a term popularized by the Economic Policy Innovation Center (EPIC) to highlight the practice of obscuring the economic and fiscal reality of legislation.
Too often, a bill is only examined based on its conventional cost, generally over a 10-year budget window. That estimate, while valuable, is not a complete measure of what legislation may cost taxpayers. Today, interest expense exceeds defense discretionary spending and is roughly equal to all nondefense discretionary spending. This cost is not financing new programs, expanding childhood education, or improving our nation’s infrastructure. It is the cost of past promises that were never fully paid for and a burden we are paying today and will likely pass down to future generations.
However, not everyone in Congress has succumbed to the use of “Washington Math.” Representative Michael Cloud (TX-27) introduced legislation with the bipartisan support of numerous cosponsors that would require the Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT) to report debt-service costs, reflecting broader recognition that lawmakers should understand not only the direct cost of legislation but also the cost of financing it. The bipartisan support he is receiving shows that there are many across the ideological spectrum who demand a more honest evaluation of legislation. Absent this reform, the CBO is unable to revise its scores beyond its longstanding convention that excludes interest expense.
As we move toward fiscal reforms, one way to push for improvements is to change how we discuss the cost. Consider, for example, H.R. 2 from the 114th Congress, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), which repealed Medicare’s sustainable growth rate formula for physician payments. CBO estimated that this legislation would increase direct spending by approximately $145 billion and increase revenues by approximately $4 billion between 2015 and 2025, a net increase in deficits of roughly $141 billion.1 This is the figure that dictated the debate, and yet it omitted interest expense. But because the deficits were financed and each year’s borrowing remained outstanding, interest expense constituted a significant increase in the total cost of the bill. As shown in Figure 1, applying the average rate Treasury actually paid on its marketable securities in each of those years adds approximately $19 billion, bringing the total cost to roughly $160 billion, or a 13 percent increase above CBO’s score.2
Figure 1. Cumulative Scored Deficit and Cumulative Unscored Interest of H.R. 2, 2015–2025
It should also be noted that this understatement is conservative, because the bill was financed during a period of relatively low interest rates. CBO’s January 2015 baseline assumed three-month Treasury bills would rise to 3.4 percent by 2018 and 10-year notes to 4.6 percent by 2020, holding near those levels through 2025.3
Rates did not follow this path. As seen in Table 1, Treasury’s average rate on marketable debt fell to 1.5 percent in 2021 before climbing to 3.4 percent in 2025, averaging roughly 2.3 percent across the period. Had CBO’s own forecast proven accurate, financing H.R. 2 would have cost closer to $34 billion, or 24 percent above the headline score. Ignoring interest costs is not a problem that only arises when rates rise unexpectedly. It is a relevant cost legislators would be wise to remember for every bill they intend to finance with debt.
Table 2. Estimated Debt Service Costs Associated with H.R. 2, 2015–2025
While that bill illustrates how past spending can prove more costly than expected, the problem is not in our rearview mirror. CBO projects a $1.9 trillion deficit in fiscal year 2026, which, at an average interest rate of 3.5 percent, would generate roughly $66.5 billion in additional interest expense in 2027 alone. That cost would continue in subsequent years as the debt is rolled over.
Annual deficits are projected to reach $3.1 trillion by 2036, while debt held by the public rises from roughly 101 percent of GDP to nearly 120 percent under CBO’s baseline. The Government Accountability Office (GAO) has projected that debt could grow even faster, reaching 251 percent of GDP by 2056. CBO also estimates that interest rates averaging just 0.1 percentage point above its projections would increase cumulative deficits by approximately $379 billion from 2027 through 2036, largely because higher interest costs would require still more borrowing.
This creates a dangerous cycle: Higher debt increases interest expense, while worsening fiscal conditions can lead investors to demand higher yields. All three major credit-rating agencies have downgraded the United States, citing persistent deficits, rising debt and interest burdens, repeated debt-ceiling brinkmanship, and the absence of a credible long-term fiscal plan. Further deterioration could lead to additional downgrades and still higher borrowing costs, worsening the fiscal outlook.
That is why the analysis of fiscal spending needs to be expanded. The CBO’s analysis is not wrong, but the conventional score is incomplete. CBO evaluates legislation according to statutory requirements and those estimates provide Congress with a consistent way to compare proposals, but they generally emphasize a bill’s direct effects on spending and revenues rather than the full debt-service costs that follow when those effects are deficit-financed. The problem is not that CBO conceals those limitations but that Washington often presents the headline score as though it represents the legislation’s complete fiscal cost.
A more honest evaluation of legislation would present at least three figures: the bill’s direct budgetary effect, the estimated debt-service cost associated with that effect, and a sensitivity range showing how those costs would change if interest rates exceed the baseline. Lawmakers should also distinguish between an actual reduction in spending and a reduction from a projected increase in spending. Without those distinctions, the public is not being shown the full price of federal policy. It is being shown Washington math.
- Congressional Budget Office, “H.R. 2, Medicare Access and CHIP Reauthorization Act of 2015,” cost estimate, March 25, 2015. ↩
- Author calculations applying US Department of the Treasury “Average Interest Rates on U.S. Treasury Securities” (total marketable series, calendar-year averages of monthly data) to CBO’s year-by-year deficit estimates for H.R. 2, last updated July 7, 2026. ↩
- The Budget and Economic Outlook: 2015 to 2025 (Congressional Budget Office, January 26, 2015). ↩
Dr. Joseph McCormack has more than 15 years of experience as an economist and subject-matter expert, specializing in economic policy analysis, forecasting, financial institutions, and econometric modeling. His expertise spans translating complex research into clear economic storytelling, evaluating fiscal and legislative policy, and leading teams in model validation, predictive analytics, and risk assessment.
Michael D. Schultz is an economist with six years of experience at the Bureau of Labor Statistics, where he managed the development and release of industry productivity data. During his time at the BLS, he led teams through complex data production cycles, implemented system and process improvements, and prepared high-level economic briefings for senior leadership along with clear, public-facing reports.
In addition to his federal service, Michael worked as an independent economic consultant, producing economic impact analyses, developing new data indices, and building interactive data tools for commercial and nonprofit clients. He holds a master’s degree in economics from George Mason University and a bachelor’s degree in international business from John Brown University.