What happened to the Tea Party?
Fiscal conservatism continues to die a slow death in the United States and the bond market may be taking notice. The latest Congressional estimates from the Joint Committee on Taxation show a $3.8 trillion increase in the deficit over 10 years, or about 14% of revenue.
Put differently, this would add about $11,000 in debt for every American and for FY 2026, it would add $481 billion to the deficit, about 1.5 pp of GDP.
The provisions include making the 2017 tax cuts permanent, adding ‘no tax on tips’ and ‘no tax on overtime’ until 2029. Now these estimates are just on the revenue side (though not all of it) so there are some spending cuts to come but so far Republicans are struggling to find common ground.
As for the bond market, we’re getting perilously close to 5% for 30-year yields.
US 30 year yields
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