May 28, 2026 · By Mariusz Kurylo · Bond Market Collapse

National Debt Interest Now Consumes Record 19% of Federal Revenue — CRFB Warns of 30% by 2036

There is a number buried in the fiscal year 2025 federal budget data that deserves far more attention than it is receiving: the U.S. government is now spending 19 cents of every dollar it collects in taxes just to pay interest on its existing debt.

Not defense. Not Social Security. Not Medicare. Not infrastructure, education, or any program that delivers a service to American citizens. Interest. Pure debt service. The cost of having borrowed heavily and continuously for decades, now coming due at interest rates that were, until recently, assumed to be permanently low.

According to the Committee for a Responsible Federal Budget (CRFB), interest costs consumed a record 3.25% of GDP and roughly 19% of all federal revenue in fiscal year 2025. This is the highest share of revenue devoted to debt interest in U.S. history. And according to CRFB's projections, it is going to get substantially worse.

The Debt Spiral Warning

CRFB's analysis presents a scenario that economists describe as a "debt spiral"—a self-reinforcing dynamic in which rising debt levels force more borrowing, which drives yields higher, which increases interest costs, which requires still more borrowing, which pushes yields higher still.

Under elevated-rate scenarios—which have now become the baseline given the Iran war's inflation shock and the 30-year Treasury's surge to 5.2%—CRFB projects that interest payments could consume nearly 30% of all federal revenue by 2036. That would be nearly triple the historical average over the past half-century.

"The combination of high debt levels and a large gap between r and g can lead to a debt spiral—where rising interest costs boost debt, rising debt boosts interest rates, and rising rates boost interest costs further," CRFB warned in its May 2026 report. The "r" refers to the real interest rate; "g" refers to real GDP growth. When the interest rate you pay on your debt exceeds your economic growth rate for a sustained period, debt becomes mathematically unsustainable without either revenue increases or spending cuts.

The U.S. is now firmly in that danger zone.

The Numbers That Should Keep Washington Up at Night

The federal government crossed $1 trillion in annual net interest payments in early 2025. At the current trajectory:

  • Fiscal Year 2025: ~$1.1 trillion in net interest payments, 19% of revenue, 3.25% of GDP
  • At 6% 30-year yields: projected interest costs would exceed $1.5 trillion annually within 3-4 years
  • By 2036 (elevated rates): interest could represent 30% of all federal revenue—leaving only 70 cents of every tax dollar for everything else government does

To put the 30% figure in context: if interest consumes 30% of revenue, and mandatory programs (Social Security, Medicare, Medicaid) consume roughly 60-65% of revenue as they do today, discretionary spending—defense, education, infrastructure, scientific research, veterans' benefits, law enforcement—would essentially be funded entirely by deficit borrowing. There would be, mathematically, no money left.

This is not a projection designed to alarm. It is arithmetic.

The Bond Market Is Already Reacting

The 62% of global hedge fund managers surveyed by Bank of America in May who expect 30-year Treasury yields to hit 6% are not making an exotic prediction. They are extrapolating from current trends: a government running $2 trillion annual deficits, an energy-driven inflation shock preventing rate cuts, foreign buyers stepping back, and a Congress considering the "One Big Beautiful Bill" which would add trillions more to deficits through tax cuts.

JPMorgan CEO Jamie Dimon has warned repeatedly that the combination of government deficits, oil prices, and geopolitical risk is placing the bond market in a uniquely vulnerable position. He identified the convergence of rising global government debt levels with the current yield spike as conditions that could "trigger a bond market crisis."

The 30-year yield's recent behavior reinforces the concern. For approximately two years, 5% acted as a ceiling—an implicit line that investors believed would trigger either Fed intervention or a growth slowdown that would bring yields down. In May 2026, that ceiling broke, with the 30-year touching 5.2% before modest relief as oil prices temporarily retreated.

The BeInCrypto analysis that noted "the move from 5% to 6% will be much quicker than the move from 4% to 5%" reflects a well-understood dynamic in bond markets: once a ceiling breaks, the next resistance level is often weaker, and the speed of moves accelerates.

What a Debt Spiral Would Mean for Ordinary Americans

A debt spiral is not primarily a financial abstraction. Its consequences show up in the real economy with brutal clarity:

Higher mortgage rates. The 30-year fixed mortgage rate tracks closely to the 10-year Treasury yield. At 4.67% on the 10-year, mortgages are already running above 6.5%. At 5.5% on the 10-year, they would approach 8%—a rate that would collapse the already-strained housing market.

Higher auto loan rates. Auto financing at 7-8% on a $40,000 vehicle adds hundreds of dollars per month to monthly payments—pricing working-class families out of reliable transportation.

Higher credit card rates. Variable-rate cards, already averaging above 22% APR, would climb further, crushing the 60%+ of American cardholders who carry a balance month to month.

Fiscal austerity. A government that must spend 30% of revenue on interest has, in practice, much less money for everything else. Cuts to federal programs, reduced transfers to states, reduced infrastructure investment—all become mathematically inevitable rather than politically optional.

Sovereign credit risk. Moody's downgraded the U.S. sovereign credit rating in 2025. If fiscal dynamics continue deteriorating, further downgrades—and the forced selling from institutional investors with rating-based mandates—become increasingly plausible.

The Clock Is Running

The CRFB's warning about 30% of revenue going to interest by 2036 is not a distant hypothetical. It is a ten-year projection based on current policy trajectories and current rate levels. Ten years passes quickly when the compound dynamics of a debt spiral are running.

The U.S. has run large deficits before and recovered. But it has never faced this combination simultaneously: multi-trillion-dollar deficits, an energy inflation shock locking out rate cuts, foreign buyers reducing their Treasury holdings, and a political environment that appears unwilling or unable to address the fiscal imbalance.

The bond market, which is ultimately the judge of sovereign creditworthiness, delivered its assessment in May: 5.2% on the 30-year, 4.67% on the 10-year, and a message that the era of borrowing without consequence is ending.

How the U.S. government responds—or fails to respond—over the next two to three years will determine whether a managed fiscal adjustment is still possible, or whether the debt spiral takes over and makes the choice for us.