Bond Vigilantes Won’t Corral Stampeding Budget Deficits
Debt markets have lost the power to rein in reckless economic policies.
These days are over.
Photographer: Natalie Behring/Getty Images
There’s a growing school of thought that federal budget deficits in the U.S. don’t matter. Just last week, Stony Brook University’s Stephanie Kelton and my Bloomberg Opinion colleague Noah Smith debated that very question: When — if ever — should we start worrying about the growing national debt?
Building upon that idea, Bloomberg News reported recently that the consensus among Washington politicians is that trillion-dollar deficits are considered “whatever” now that Republicans have moved away from the Tea Party movement and embraced the Trump administration’s fiscal freewheeling. Supporting this general ambivalence, the writers and others have said, is the fact that bond traders aren’t sending Treasury yields through the roof in anticipation of widespread inflation.