Debt Interest Eats Record 19% of US Revenue
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- CRFB reported that debt interest consumed a record 3.25% of GDP and roughly 19% of all federal revenue in fiscal year 2025, with the federal government now spending more on interest than on Medicaid, national defense, or all non-defense discretionary programs combined.
- Treasury yields are driving the crisis, with the 30-year yield surging past 5.19% — its highest level in almost 20 years — roughly 55 basis points above CBO projections across the yield curve.
- CRFB's elevated-rate scenario projects interest costs growing 2.5-fold, from $880 billion today to $2.5 trillion by 2036, pushing debt interest's share of federal revenue to almost 30% — nearly triple its historical 50-year average.
- The watchdog warned of a compounding debt spiral: when the average interest rate on the debt exceeds the economic growth rate (r>g), debt can rise uncontrollably, with the r-g gap projected to reach 75 basis points by 2036.
- The mechanics create a feedback loop where rising interest costs boost debt, rising debt boosts interest rates, and rising rates boost interest costs further, making it increasingly difficult for responsible fiscal policy to intervene.
Why it matters: At nearly one-fifth of revenue going to interest payments, Washington has less fiscal flexibility for any program or emergency — and CRFB's projection that this share could hit 30% by 2036 (nearly triple the 50-year average) means bond markets, not policymakers, may increasingly set the boundary of what the federal government can afford.
