Edward Conard

Top Ten New York Times Bestselling Author

  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
Upside of Inequality Oxford Unintended Consequences

AI Summary. US interest rates fell for roughly 40 years before the pandemic, allowing maturing high-coupon debt to be refinanced at lower rates and keeping federal interest expense manageable even as debt rose. Because Congressional Budget Office projections assume the 10-year Treasury yield drifts down to 3.8% from about 4.1%, the author argues its debt-service projections face upside risk.

Robin Brooks Robin Brooks Substack
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Robin Brooks argues that prior to the pandemic, US debt service was “manageable” even as debt soared, as older, higher-coupon debt was rolled over into lower-coupon debt. That dynamic has now reversed.

Do official debt-service projections understate the risk from rising bond yields?

Core argument: CBO assumes the 10-year Treasury yield drifts down to 3.8% from roughly 4.1% over the coming decade, which the author argues leaves upside risk, perhaps substantial, to CBO's debt service projections.

As the bottom right chart shows, US interest rates were on a 40 year downtrend in the run-up to COVID, which meant that high coupon debt was getting continuously replaced with low coupon debt, keeping the interest expense manageable even as debt soared. This accident of history has run its course. If anything, it’s likely that US and global interest rates are trending up from here, which could push our debt service much higher. CBO projections assume a slight downward trend for the 10-year Treasury yield over the coming decade (to 3.8% from around 4.1% currently). As a result, there’s very likely upside risk - perhaps substantially so - to CBO’s debt service projections. Our luck has run out.

Takeaways by Macro Roundup® AI

  1. CBO assumes the 10-year Treasury yield drifts down to 3.8% from roughly 4.1% over the coming decade, which the author argues leaves upside risk, perhaps substantial, to CBO's debt service projections.
  2. US interest rates fell over a 40-year downtrend before COVID, replacing high-coupon debt with low-coupon debt and keeping interest expense manageable even as debt soared.
  3. The author argues that the decades-long decline in rates has run its course and that US and global interest rates are likely trending up, which could push debt service much higher.

Related Articles:

  • How A Global Debt Crisis Starts — Far-forward government bond yields — what markets price for the 10-year yield 10 and 20 years ahead — have risen in Japan, the UK, France and Germany, with Japan's 10-year yield 20 years forward at 4.5%. The US 10y20y forward yield has fallen slightly, which the author attributes to safe-haven inflows.
  • Global Debt Report 2025 — About 60% of fixed-rate government debt in advanced economies maturing by 2027 — roughly $9tn — was issued before the recent interest-rate tightening, with weighted average yields below 2% versus projected 10-year rates near 3.6%, implying refinancing at nearly double the original cost. France, Spain, the UK, and the US face heightened vulnerability, with maturing debt exceeding 15% of GDP.
  • Our Thoughts on Large US Deficits and Their Impact on Bond Yields — Total borrowing in the US is about average despite high government deficits, as high public borrowing has contributed to the need for higher interest rates that have depressed private sector borrowing. Risk premiums on long-dated debt look about average, with no market signs that economic or debt limits are currently being hit.
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