Percent of Revenue for Interest Payments vs FEDFUNDs Ratio

This chart attempts to show the ratio between the percent of federal tax receipts used to pay interest on the national debt (currently around 20% of tax receipts) and the FEDFUNDS rate. This ratio has been growing through the years as the debt grows larger and people are less willing to buy treasuries at low interest rates. Even with historically low interest rates in the present day, the debt burden is large enough to over come this.

The effect of the FEDFUNDS rate on government expenditure will continue to grow with time. If inflation keeps up and rates are raised we could see even more than 50% of tax receipts going to pay the interest on the national debt. The ratio increases with time, which means that the effect of FEDFUNDS will have more impact on government interest payments.

Another way to see this impact is through looking at FRED:A091RC1Q027SBEA/FRED:W006RC1Q027SBEA-FRED:FEDFUNDS/100