The United States' national debt has recently exceeded $40tn, while its federal deficit is running at approximately 6% of GDP. This comes as global long-term interest rates are steadily increasing.
US Treasury Secretary Scott Bessent has previously dismissed concerns about the debt, stating that economic growth would allow the US to meet its interest obligations without significant tax increases or spending cuts. However, Bessent is reportedly attempting to influence the bond market by adjusting the maturity structure of government debt.
The rising premium on long-term US treasuries has largely disappeared, suggesting that US debt is no longer trading as a uniquely safe asset compared to other advanced economies. This development indicates a potential fading of the dollar's dominance as the global reserve currency.
Economists suggest that major budget consolidation is the textbook response to the situation. However, there is no indication of meaningful debt reduction before November's midterm elections.