Last week, the bond market sent a message to Washington. The yield on the 10-year Treasury rose to 5.04%, its highest since 2007, and the Fed raised rates for the first time since 2023. Oil prices and inflation have lit this match, but rising government debt is on every analyst’s list of why yields continue to climb.
Here’s what they’re climbing against. The gross national debt surpassed $40 trillion in August, after reaching $38 trillion in October and $39 trillion in March. A trillion dollars every five months. The deficit has reached $2 trillion with still a month left before the fiscal year. In 2025, Moody’s became the last of the three major credit rating agencies to strip the United States of its AAA rating, joining S&P (2011) and Fitch (2023).
In The sun is also risingErnest Hemingway’s Bill Gorton asks his drinking buddy Mike Campbell how he went bankrupt. “Two ways,” Mike replies. “Little by little, then all at once.” We are immersed in the “gradually”.
The stakes are higher than the debt. Reserve currency status is why the world lends us money cheaply, why we can run deficits that would break any other country, and why U.S. sanctions have teeth. This privilege is based on the certainty that America pays its bills. And trust is lost the same way Mike Campbell went bankrupt.
The composition has already started. In fiscal year 2025, net interest payments reached $970 billion — about $150 billion more than we spent on national defense — and increased another $111 billion, or 12 percent, this year. America now pays more to its creditors than to its military, and interest is the fastest-growing major program in the budget, expected to more than double to $2.1 trillion by 2036. We are renewing a variable-rate loan the size of the economy. Last week, the rate adjusted.
For the first 200 years, Congress lived relatively within its means; before Keynesian economics, they called it “the tax religion of old.” Then came the Congressional Appropriations Act of 1974, creating a budget resolution process and 12 appropriations bills — a process that Congress completed on time exactly four times over the next half-century. There won’t be five this year. After none of the 12 bills passed, Congress postponed until Dec. 11 so members could campaign first.
So why isn’t Congress fixing this problem? I looked at the answer from the inside.
As a member of the Senate budget staff, I helped introduce an actual budget resolution in the summer of 2022 – (at the time) Senator Mike Braun’s attempt to get the Senate to do the one thing the budget law requires it to do. The motion to continue failed 34 to 63 and did not attract a single news story. This was not a vote against our budget; it was a vote against debate any budget. We have learned that you cannot legislate on political will.
Gadgets are everywhere once you know where to look. First passed in 1990 and made permanent in 2010, the PAYGO Act requires new spending to be offset by new revenue. Expenditure takes place in the first few years; taxes appear later – and then, conveniently, never appear at all. Take the revenue from the Affordable Care Act: Congress postponed a tax here and a tax there, then made most of them disappear. It’s no different from Enron’s mark-to-market accounting: recording hypothetical profits today to pay bonuses without an actual dollar coming in the door. The difference is that people from the private sector have been imprisoned.
The caps written by Congress are waived by Congress: “emergency” designations exempt spending from any fiscal rules, and the PAYGO dashboard — the mechanism supposed to trigger automatic cuts for deficit-increasing laws — is lifted with a few words on the last page of each omnibus. Meanwhile, the Pentagon has failed eight consecutive audits; in 2022, it couldn’t fully account for 61% of its $3.5 trillion in assets – not exactly a report you’d share with your banker.
And here’s the part the public rarely hears: Cable tax fights only cover 27 percent of the budget – discretionary spending. Politicians ignore mandatory spending (60%) and debt interest (13%).
None of this is a secret to the referee. The CBO produces a long-term fiscal outlook that now looks like a broken record: Rising debt risks causing a fiscal crisis in which investors will lose confidence, rates will rise sharply, and the dollar’s reserve status will erode. The doctor entered it into the file. Blood tests slip. The only question is whether anyone reads the file.
They say that in the land of the blind, the one-eyed are kings. This is the true condition of America as the world’s reserve currency – not healthy, but simply better than that of every other country in the region, even as foreign investors hold a shrinking share of America’s debt. Maybe that’s the gamble: as long as we’re better than the alternatives, the money has nowhere to go and the heart attack never comes.
But “better than everyone” is a relative measure, and relative measures evolve. Britain was the world’s reserve until it wasn’t. The rating agencies have spoken out. The government’s own observer put his warning in writing. And Congress is asleep at the wheel. Heart attacks don’t announce themselves: when they do, austerity looks like stents and valves, and that assumes you get to the emergency room on time.
Being king only works if we keep that eye open. This is gradually happening now. This is suddenly the part that no one schedules.
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Gn bussni
