Trump and Biden: The National Debt
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Showing 100 database articles primarily about Fiscal Deficits
US 30-Year Bonds Erase Gains From Treasury’s Buyback Surprise
AI Summary. US government bond yields have returned to near two-decade highs despite a buyback program targeting long-dated debt, indicating that investor concern over rising government borrowing remains unresolved.
Michael MacKenzie and Alice Gledhill Bloomberg- Date Posted:
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The 30-year yield rose ~7bps to as much as 5.27%, and the 10-year yield hit 4.71%, erasing “almost all” the gains that followed Treasury’s surprise decision to increase buybacks of longer-dated bonds.
Does government debt buyback activity actually reduce long-term borrowing costs?
Core argument: The 30-year Treasury yield surged 7 basis points to 5.27%, erasing virtually all gains from the Treasury’s surprise buyback announcement and signaling the intervention failed to calm investor concerns over fiscal sustainability.
US Treasuries erased almost all of the gains that followed the Trump administration’s surprise decision to increase buybacks of longer-dated bonds, signaling the move has done little to alleviate the angst about the surging government debt that has pushed some yields to the highest in close to two decades. The 30-year yield on Thursday rose over seven basis points to as much as 5.27%, where it was just ahead of the US Treasury Department’s announcement early Wednesday, before paring the gain. The 10-year yield touched 4.71%, just shy of its highest level since early 2025.Takeaways by Macro Roundup® AI
- The 30-year Treasury yield surged 7 basis points to 5.27%, erasing virtually all gains from the Treasury’s surprise buyback announcement and signaling the intervention failed to calm investor concerns over fiscal sustainability.
- The 10-year Treasury yield reached 4.71%, approaching its highest level since early 2025, as surging government debt continues to pressure long-duration bonds.
Related Articles:
- Bessent Boosts Debt Buybacks After Climb in Treasury Yields — The US Treasury doubled the size of its buyback operations for long-dated government debt to reduce upward pressure on yields, which had reached their highest level in nearly two decades.
- The Coming Great Repression? — Higher public debt is historically associated with lower, not higher, government bond returns, as financial repression forces banks to hold low-yield bonds and cheap reserves, suppressing borrowing costs. This mechanism reduced British public debt by ~91% of GDP in 1945–55, dwarfing the contributions from inflation or budget surpluses.
- The United States Capital Structure — Government bondholders hold the riskiest position in the U.S. fiscal structure, absorbing adverse shocks through inflation or financial repression, while entitlement recipients function as senior claimants whose payments are politically protected.
A Long-Run Economic Model for Projecting the Finances of the U.S. Government and National Spending on Healthcare: Analysis of Productivity Increases and Health Sector Reform
AI Summary. U.S. federal debt is projected to reach 151% of GDP by 2036 and 309% by 2056 as rising real interest rates exceed economic growth, creating a self-reinforcing cycle of higher deficits and debt. National health spending is projected to reach 21.2% of GDP by 2036, rising to 37.2% by
Mark Warshawsky American Enterprise Institute- Date Posted:
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Warshawsky projects US debt-to-GDP will be 151% in 2036, well above CBO’s 120% projection, as higher real rates and a dynamic Baumol cost-disease effect will increase healthcare spending relative to GDP in an aging economy.
Will rising healthcare costs overwhelm U.S. fiscal capacity?
Core argument: U.S. federal debt-to-GDP reaches 151% by 2036 and 309% by 2056 under this general-equilibrium model—far exceeding CBO’s 120% and 175% projections—as real interest rates outpace economic growth, locking deficits and debt in a self-reinforcing spiral.
The Congressional Budget Office makes certain simplifying assumptions on health care spending, and is based on current law. By contrast, in the model presented in this paper, these variables are simultaneously determined by supply and demand, based on logical functional forms and parameter estimates from the literature or empirical analysis, and the model is based on current policy. This approach better reflects real economic relationships—between health care spending, the federal budget, and investment in capital—and changing underlying conditions, especially demographics. Within the next twenty or so years, the model predicts that federal government debt will grow significantly beyond historical experience, to be judged unsustainable because the real interest rate exceeds real economic growth. Debt-to-GDP will be 151% in 2036, 218% in 2046, and 309% in 2056, compared to CBO’s 120% in 2036 and 175% in 2056. Real interest rates rise for several decades, ratcheting interest payments, deficits, and debt in a vicious cycle.Takeaways by Macro Roundup® AI
- U.S. federal debt-to-GDP reaches 151% by 2036 and 309% by 2056 under this general-equilibrium model—far exceeding CBO’s 120% and 175% projections—as real interest rates outpace economic growth, locking deficits and debt in a self-reinforcing spiral.
Related Articles:
- Can AI Avert the Impending Federal Budget Crisis? — Higher economy-wide productivity growth raises incomes but also accelerates healthcare inflation, so a productivity surge from 1.8% to 2.7% raises GDP per capita from $102,000 to $110,000 by 2035 while pushing healthcare spending from 21% to 21.7% of GDP.
- How Might Fiscal Policy Respond to the Rise of Artificial Intelligence? — A 0.5% annual productivity growth boost would reduce publicly held federal debt by 39% of GDP over 30 years, cutting roughly half of the projected rise from 101% to 175% of GDP, through higher tax revenue, slower spending growth relative to GDP, and debt dilution that outweighs higher borrowing costs.
- The Budget and Economic Outlook: 2026 to 2036 — CBO projects a deficit of 5.8% of GDP in 2026, unchanged from 2025. Outlays, at 23.3% of GDP, will exceed their 50-year mean by 2.1pp; revenue of 17.5% is just…
Intergovernmental Grants to School Districts and Educational Outcomes During the COVID-19 Pandemic
AI Summary. Emergency federal education grants during the pandemic did not measurably reduce student learning loss, partly because qualifying districts saw local revenues fall by ~$907 per pupil over three years — offsetting federal funds rather than supplementing them.
Jeffrey Clemens, Philip Hoxie and Stan Veuger National Bureau of Economic Research- Date Posted:
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Exploiting a discontinuity in K-12 public school districts’ qualification for Covid emergency funding (ESSR), Clemens et al find that the funds did not mitigate learning loss. To a large extent, local districts used them to lower property taxes.
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- What Do States Do with Fiscal Windfalls? Evidence from the Pandemic — Of the almost $1T in Federal pandemic-era fiscal aid to states, 38% went to general government expenditures (excluding healthcare, education, and…
- Spatial Spillovers and the Effects of Fiscal Stimulus: Evidence from Pandemic-Era Federal Aid for State and Local Governments — Accounting for spillovers from other states, @stanveuger and @jeffreypclemens find that $900B federal pandemic aid translated to $878,000 of spending to create…
How Might Fiscal Policy Respond to the Rise of Artificial Intelligence?
AI Summary. A 0.5% annual productivity growth boost would reduce publicly held federal debt by 39% of GDP over 30 years, cutting roughly half of the projected rise from 101% to 175% of GDP, through higher tax revenue, slower spending growth relative to GDP, and debt dilution that outweighs higher borrowing costs.
Karen Dynan, Douglas Elmendorf and Louise Sheiner National Bureau of Economic Research- Date Posted:
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CBO baseline projects debt-to-GDP rising from 101% in 2026 to 175% in 2056. Dynan et al. study how AI might modify that projection. In all but their most optimistic scenario, TFP grows 0.5pp faster, and AI offsets 39–49 pp of that 74pp increase.
Does productivity growth from artificial intelligence solve the federal debt problem?
[In the Base Case], faster economic growth [improves the federal budget and debt outlook] through four channels. First, [higher] incomes increase federal revenue, [while] the progressive tax system [modestly] raises revenue relative to GDP. CBO [estimates] that a [permanent] 0.5 pp increase in annual TFP growth would raise revenue after [30 years] by 0.14% of GDP. Second, [although] faster growth increases [some] federal spending, spending rises [more slowly] than GDP, [reducing noninterest outlays] relative to GDP. Under our [assumptions], discretionary spending falls from 6.1% of GDP in 2025 to 4.5% in 2056. Third, because faster growth does not [change the stock of] existing debt, that debt becomes smaller relative to GDP. Fourth, [stronger] growth generally raises interest rates, increasing the [cost] of new borrowing and [refinancing] existing debt. This represents a partial offset to the [fiscal gains]. [On balance], additional annual TFP growth of 0.5 pp would lower publicly held federal debt after [30 years] by 39% of GDP relative to CBO’s extended baseline. CBO’s extended baseline shows federal debt rising from 101% of GDP in 2026 to 175% in three decades, so this hypothesized increase in growth would offset roughly half of that projected rise.Related Articles:
- Can AI Avert the Impending Federal Budget Crisis? — Higher economy-wide productivity growth raises incomes but also accelerates healthcare inflation, so a productivity surge from 1.8% to 2.7% raises GDP per capita from $102,000 to $110,000 by 2035 while pushing healthcare spending from 21% to 21.7% of GDP.
- U.S. Treasury Investors Are Long in AI — U.S. government debt acts as a leveraged bet on long-run productivity growth, because tax revenue rises automatically with faster growth while spending commitments stay flat. Each 0.1 percentage point increase in permanent productivity growth raises the fundamental value of government debt by $1.3tn, implying a 71 basis point decline in
- The Budget and Economic Outlook: 2026 to 2036 — CBO projects a deficit of 5.8% of GDP in 2026, unchanged from 2025. Outlays, at 23.3% of GDP, will exceed their 50-year mean by 2.1pp; revenue of 17.5% is just…
Annual Economic Report
AI Summary. Public debt has risen sharply across both advanced and emerging economies, with cyclically adjusted primary deficits nearly doubling in advanced economies to 1.9% of GDP and surging from 0.1% to 1.8% in emerging markets, leaving governments with limited capacity to absorb future economic shocks.
BIS Staff Bank of International Settlements- Date Posted:
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BIS warns, “Countries can no longer count on nominal growth to stabilise debt dynamics. They now must run primary surpluses or significantly smaller deficits to maintain stable debt-to-GDP ratios.”
Does rising public debt limit governments' ability to handle future crises?
Core argument: Cyclically adjusted primary deficits in AEs doubled to 1.9% of GDP since 2022 versus 1.1% over 2000–2019, reducing fiscal space.
Many countries entered the current energy crisis with limited fiscal space. Public debt in [Advanced Economies] (AE) has risen steadily over recent years (Graph 15.A), reducing governments’ ability to cushion fallout from higher energy prices. Although the increase partly reflects successive shocks, from the Covid-19 recession to the war in Ukraine, persistent failures to make meaningful progress on fiscal consolidation during economic expansions have also played a part. Cyclically adjusted primary deficits in AEs averaged 1.9% of GDP from 2022 onwards (Graph 15.B), nearly double the 1.1% recorded over the two preceding decades. [Emerging market economies] (EME) have seen an even sharper deterioration (1.8% since 2022 versus 0.1% between 2000 and 2019). Fiscal positions are set to remain strained over the coming years. Debt servicing costs are unlikely to ease soon, as higher interest rate payments continue to weigh on fiscal accounts (Graph 15.C). Deficits in 2027 are projected at or above 2025 levels in most jurisdictions.Takeaways by Macro Roundup® AI
- Cyclically adjusted primary deficits in AEs doubled to 1.9% of GDP since 2022 versus 1.1% over 2000–2019, reducing fiscal space.
- EMEs experienced sharper fiscal deterioration with deficits at 1.8% since 2022 versus 0.1% in 2000–2019, limiting their capacity to cushion.
- Higher interest rate payments drive debt servicing costs upward, keeping deficits at or above 2025 levels through 2027 across most.
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- Are Government Bonds Safe in Times of War and Pandemic? — US government bonds, normally safe assets, become risky in times of war because of negative real returns due to bursts of inflation. As in the fiscal theory of…
- Our Thoughts on Large US Deficits and Their Impact on Bond Yields — Bridgewater believes an increase in the deficit to 7-8% of GDP will not put undue pressure on bond yields. They argue rates reflect total credit creation…
More T-Bills, More Dependence on the Fed
AI Summary. T-bill issuance has reached ~85% of gross Treasury supply, near a two-decade high, making government borrowing costs increasingly sensitive to short-term interest rates set by the Federal Reserve.
Torsten Sløk Apollo- Date Posted:
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T-bills are ~85% of gross Treasury issuance, meaning Federal borrowing costs are more closely tied to the front end of the curve, the part most directly under the Fed’s control.
Does rising short-term debt issuance increase government vulnerability to Fed policy?
Core argument: T-bills comprise 85% of gross Treasury issuance, near 20-year highs, tying federal borrowing costs directly to Fed policy rates.
T-bills now account for almost 85% of gross Treasury issuance, near the highest share in over two decades. By tilting issuance toward short-dated debt, the government ties its borrowing costs more closely to the front end of the curve, making its financing increasingly dependent on Fed policy.Takeaways by Macro Roundup® AI
- T-bills comprise 85% of gross Treasury issuance, near 20-year highs, tying federal borrowing costs directly to Fed policy rates.
- Short-dated debt concentration drives government financing vulnerability to near-term rate decisions, increasing refinancing risk vs. longer-maturity alternatives.
- Front-end curve dependence results in fiscal costs rising faster when the Fed maintains restrictive policy, amplifying deficit pressures.
Related Articles:
- The Budget and Economic Outlook: 2026 to 2036 — CBO projects a deficit of 5.8% of GDP in 2026, unchanged from 2025. Outlays, at 23.3% of GDP, will exceed their 50-year mean by 2.1pp; revenue of 17.5% is just…
- The Robin Hood State Is Coming For The Rich — Advanced economies have become increasingly redistributive. “While the share of US taxable income going to the top 1% of earners soared, their share of…
- The United States Capital Structure — Government bondholders hold the riskiest position in the U.S. fiscal structure, absorbing adverse shocks through inflation or financial repression, while entitlement recipients function as senior claimants whose payments are politically protected.
Allysia Finley commented, “…We could spend all night fact-checking both candidates, but a brief note on a tendentious question on the national debt posed by CNN moderator Jake Tapper. He referred to a study by the Committee for a Responsible Federal Budget, which purportedly found that Donald Trump approved $8.4 trillion of new 10-year borrowing, while Joe Biden added only $4.3 trillion. The study inflates the cost of Mr. Trump’s tax cuts—including bipartisan efforts that repealed the Affordable Care Act’s medical device and Cadillac insurance taxes—while low-balling the costs of Mr. Biden’s spending increases and regulations. For example, the study dings Mr. Trump for adding to the debt by ending certain Affordable Care Act cost subsidies, which it says caused insurers to raise premiums and thereby increased other insurance subsidies. The outfit says Mr. Trump added to the deficit with a 2020 rule that restricted drug-maker rebates in Medicare, though that rule never took effect. Then the study claims that Mr. Biden’s Inflation Reduction Act reduced the national debt by delaying the same rebate rule and increasing IRS funding. All of which is to say that the figures cited by Mr. Tapper include subjective judgments that are biased in favor of Mr. Biden. But for the record, the national debt increased by $2.6 trillion during Mr. Trump’s first three years before Covid and $5.2 trillion during Mr. Biden’s first three….”
Marc Goldwein commented, Re: “But for record, the national debt increased by $2.6T during Mr. Trump’s first three years before Covid and $5.2T during Mr. Biden’s first three.” That’s true, but says nothing about how much debt each approved over a ten year period. “…1) Their response over-estimates Biden executive orders by $800 billion — mainly because it counts proposals that haven’t been finalized ($150b) or even introduced ($350b), but also because they overestimate some provisions (~$200b) and don’t count deficit reducing executive orders (~$100b) 2) There is no “Extra $1.1 trillion” from the infrastructure bill. What they are referring to is a weird baseline budget rule quirk that required CBO to assume $1.1 trillion of extra costs in their 2022 baseline and then remove $1 trillion of that in their 2023 baseline 3) IRA does indeed save less/cost more, which we discuss in our paper. But our paper is based off of prospective estimates. And House budget overstates the difference — its probably about $250 billion worse than we say 4) TCJA also costs more, even though house budget says it costs less. Heck, estimates of extending TCJA have gone up 50%!. The extra $1 trillion they point to has nothing to do with TCJA, and was a one-time revenue surge from the big surprise inflation and capital gains during and after the pandemic.”