Washington — The world is becoming more nervous about lending money to the president Donald Trump Government – cause Interest rates To climb by the methods that Exacerbating pressures on affordability, Impeding economic growth And create a A new danger to Republicans In the midterm elections next November.
The rise in energy prices resulting from the Iran war has leaked to the world Bond price Which helps fund the US government. Interest rates on 10-year US Treasury bonds exceed 4.44%, after being 3.95% before the war began at the end of February. middle Mortgage rates to their highest levels in nine months, while car sales fell.
The challenge is global in scope, with interest rates rising in many countries as the world adjusts to the prospect of higher inflation, growing questions about the sustainability of government debt and spikes in interest rates. Investing in artificial intelligence.
Trump has tried to reassure Americans that he has a plan to reduce the annual budget deficit, which amounts to about $1.8 trillion. It has been pointed out in the past Revenue from tariffsPayments from foreigners to him “gold card” visa, and the spending cuts he made Government Efficiency Departmentand faster economic growth. He said last week Fraud Task Force Led by Vice President J.D. Vance, it will be the key to unlocking massive savings.
“If he does really great, we’ll have a balanced budget without having to do anything,” Trump said.
Economists say Trump’s strategies to effectively reduce the deficit are unlikely to produce the promised results.
The cost of servicing the National debt Spending has tripled since 2021 to more than $1 trillion annually, said Jessica Riedel, a budget and tax fellow at the Brookings Institution.
“President Trump signed on Tax cut bill “This would likely add $5 trillion to the deficit over a decade – and tariffs only offset a small portion of those costs,” she said. “The budget deficit is still expected to rise to more than $4 trillion annually within a decade under current policies.”
The deficit is expected to grow over the next decade as costs rise Social Security and Medicare exceed tax revenues.
The interest rate on 10-year US Treasury bonds rose to 4.67% in mid-May, and has since fallen with… Negotiations on a ceasefire in Iran Continue – just as interest rates initially rose in 2025 because of Trump Definitions of “Liberation Day”. They then began to decline once Trump rolled back the more extreme increases.
When Kent Smetters, director of budget modeling at Penn Wharton, analyzed the calculations associated with rising 30-year Treasury yields, he estimated that 60% of the increase came from expectations that America would continue massive borrowing and that the other 40% was linked to inflation caused by the Iran war and Trump’s tariffs.
Glenn Hubbard, former head of the White House Council of Economic Advisers during the George W. Bush administration, is concerned that the United States may no longer have the same borrowing capacity as it once did to effectively combat economic crises, such as the financial crisis. 2008 crash or Coronavirus pandemic.
“I don’t think we have the space we had in 2008 or 2020 to deal with it,” said Hubbard, now a professor at Columbia Business School. “Washington doesn’t seem to be full of ideas — good or bad — to solve this problem.”
High interest rates give Democratic candidates the… Races to determine control of the House and Senate Another offensive line at the time Voters are worried on High costs of food and gasoline.
And in Colorado’s 5th Congressional District, Democrat Jessica Killen is leaning toward the message that persistent deficits and high interest rates make it difficult to buy or renovate a home, buy a new car or manage credit card debt.
“Things are really expensive,” said Killeen, an Army veteran who was one of his top aides. Doug Emhoffformer second-in-command. “We can already talk about gas, but the cost of borrowing makes it worse.”
Joe Regan, an Army veteran who is also seeking the Democratic nomination, said in an email that he talks “a lot about financial management” in his campaign. “Every dollar spent on paying benefits is a dollar not invested in infrastructure, education, veterans services or economic growth,” he said.
They are challenging Republican Rep. Jeff Crank in a district their party sees as a potential rebound. The deficit is an example of how Trump “says one thing and does the opposite,” Killeen said.
In his March 2025 address to Congress, Trump declared that “in the near future, I want to do what hasn’t been done in 24 years: balance the federal budget. And we will work to balance it.”
Karnak, the current Republican nominee, did not respond to requests for comment.
The administration insists it will work on reducing steadily Budget deficit. As a share of the overall economy, the deficit last year was smaller than it will be in 2024, although that decline depended in part on revenue from tariffs that are subject to a clawback after the Supreme Court ruled they were illegal.
Treasurer Scott Besent last week cited a report showing that there is up to $500 billion a year in fraudulent government spending that could be eliminated, “significantly reducing the deficit.”
Besant seems to have drawn this conclusion from A Government Accountability Office 2024 Report It is estimated that there is between $233 billion and $521 billion annually in fraudulent spending. But these numbers are partly derived from the pandemic era when the government borrowed heavily to stabilize the economy.
The White House and Treasury Department did not respond to questions about the source of Picente’s claims.
Regarding the deficit, Besant told reporters at the White House that the administration basically took a bad hit from former President Joe Biden, a Democrat. “We inherited the worst budget deficits in history — in history — when we were not in a recession or at war,” Besant said.
Besant had previously announced that the administration would aim to reduce the annual deficit to 3% of US gross domestic product. It’s almost double that now and Besant did not directly answer a question about the timetable for his target to be hit.
As of now, investors continue to buy shares in US companies, causing… Stock market to increase value In a sign of confidence in America’s economic potential. But the increase in interest rates also indicates that investors view the national debt as a weakness for the United States
Financial markets may be able to inflict enough pain by raising interest rates to force political leaders to address systemic imbalances. Many economists said they expect markets will force the deficit issue before voters.
Hubbard stressed that the entire bond market system depends on confidence in debt repayment. He pointed out that the word “virtue” is related to a Latin term, which is also the origin of the word doctrine, which relates to a system of beliefs.
“That’s what debt is about: I think you’re going to pay me back,” Hubbard said. “This works until it doesn’t work.”