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Treasury Secretary Scott Bessent has so far dismissed concerns about the U.S. debt, which recently surpassed the $40 trillion mark, calling them “a big burger made of nothing.” According to him, economic growth will be so spectacular that America will have no trouble meeting its interest payments without having to significantly raise taxes or cut spending, as long as the rest of the world continues to happily supply the country with money.
But if Bessent truly believes this, then why is he twisting the bond market’s arm by manipulating the maturity structure of the national debt?
The Fundamental Problem
The obvious first step—and the one the markets are expecting—is to address the fundamental problem: reining in the massive U.S. federal budget deficit, which currently stands at about 6% of GDP. Bessent regularly assures the markets that the Trump administration’s rampant borrowing is temporary, and that economic growth driven by artificial intelligence (AI) will generate abundant tax revenues, which will soon reduce the budget deficit to a more or less manageable level—3% of GDP.
All of this is possible, but there are many reasons to believe that painless budget consolidation is a pipe dream. In particular, profits from AI will likely be much harder to tax than labor income. In the near term, budget expenditures—to support the aging population, to fund the military budget—which, by all accounts, is set to grow inevitably—as well as concessions to persistent populist demands to increase government spending—will grow at least as fast as budget revenues.
The situation is exacerbated by the fact that the yield on long-term U.S. Treasury bonds (an important component of the dollar’s “exorbitant privilege” as a global reserve currency) has largely evaporated.
U.S. debt is no longer traded as a particularly reliable asset compared to the debt of other developed countries. Thus, the value of the dollar’s dominance is diminishing even under the most favorable circumstances. And if fiscal problems trigger a crisis in the future, the result could be a rapid loss of the dollar’s share of the global market—a process that might otherwise take decades.
What should the Treasury Department do? There is a textbook answer, one that Bessent is familiar with: it must seriously pursue budget consolidation, rather than implementing reckless, crude, and chaotic spending cuts, as Elon Musk and his henchmen from the Department of Government Efficiency (DOGE) did in 2025.
Taxpayers aren’t ready for austerity measures
But Bessent’s problem is that his boss, Donald Trump, understands full well: U.S. taxpayers are not ready for any real, harsh budgetary austerity measures.
That is precisely why Bessent’s use of bond buyback maneuvers is concerning. Essentially, Bessent is promising to remove long-term debt from the system and replace it with short-term debt. This is very similar to the Fed’s actions during the quantitative easing era. This approach might make sense during periods of panic, when there’s a high probability that long-term rates will fall again, but right now there are few signs of panic in the market.
Moreover, global long-term real interest rates are rising everywhere, which means the “American exception” no longer applies—at least not to the same extent.
Bessent argues that long-term rates are currently too high and favors short-term borrowing to weather the spike in rates, which he believes will soon give way to a decline.
He may be right. Many prominent economists (especially those who insist that interest rates will remain ultra-low forever) still cling to the view that the current elevated rates are an aberration.
Unfortunately, as studies based on historical data show, the current rise in rates should be viewed as a normalization, and in the long run, they are more likely to rise than to fall.
Given that U.S. national debt now exceeds $40 trillion, this is not the best time to tell investors that there is “nothing magical” about this figure. Against the backdrop of a growing budget deficit, rising long-term interest rates, and increasing demands for new spending, America’s debt burden is a cause for real concern.
Even more alarming is that Bessent’s clumsy attempt to control the bond market is tarnishing the hard-won reputation he has established as the most level-headed member of Trump 2.0’s economic team.
So far, Bessent has managed to dissuade Trump from some—though not all—of his most harmful initiatives, whether they concerned tariffs or the appointment of the Fed chair. Yes, he has to toe the party line on the most contentious issues so close to Trump’s heart (for example, he claims that America has effectively defeated Iran and that nothing would benefit working Americans more than the collapse of the global trading order). Otherwise, he would have simply been fired on the spot. But bond markets aren’t so easily swayed.
Bessent, a former bond trader and hedge fund manager, scored a major victory by propping up the Argentine peso last fall. And he probably didn’t do too much harm by unexpectedly propping up the Japanese yen this summer, although the effect of that intervention faded quite quickly. His experiment with Treasury-led quantitative easing, on the other hand, did nothing to halt the rise in long-term yields.
Since no significant debt reduction is expected before the November midterm elections, bond markets have good reason to remain deeply skeptical about America’s fiscal trajectory.
Kenneth Rogoff,
former chief economist of the International Monetary Fund, currently a professor of economics and public policy at Harvard University, winner of the 2011 Deutsche Bank Prize in Financial Economics, and co-author (with Carmen Reinhart) of the book *This Time Is Different: Eight Centuries of Financial Folly” (Princeton University Press, 2011) and author of “Our Dollar, Your Problem” (Yale University Press, 2025).
© Project Syndicate, 2026.
www.project-syndicate.org
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