As budget deficits rise this year and for the next several years thanks in part to the recently passed GOP tax cuts, the U.S. Treasury will have to ramp up its borrowing.
A group of private banks that advise the Treasury now estimates that the department will need to borrow $955 billion this fiscal year, up from $519 billion last year — and that the total will rise to $1.083 trillion in 2019 and $1.128 trillion in 2020.
That outlook for government debt is affecting financial markets and driving interest rates higher, The Wall Street Journal says. “For decades, the U.S. government could issue as much debt as it needed to finance deficits without worrying about how it affected financial markets or the economy. That might be changing,” Kate Davidson and Daniel Kruger write.
One bond manager warns that if Treasury yields rise and inflation shoots higher — still a big if — long-term interest rates could climb high enough to limit economic growth.