But that changed recently, with the two now converging at just above 2%, due in part to government spending during the pandemic and higher inflation—which forced the Federal Reserve to hike interest rates aggressively, dragging yields higher. Meanwhile, Trump’s tax cuts and spending are expected to add trillions to the deficit in the coming years, with the total debt-to-GDP ratio surpassing the post-Word War II record soon. “But that path remains unsustainable: The primary deficit is much larger than usual in a strong economy, the debt-to-GDP ratio is approaching the postwar high, and much higher real interest rates have put the debt and interest expense as a share of GDP on much steeper trajectories than appeared likely last cycle,” Goldman Sachs said in a note last month.
Author: Jason Ma
Published at: 2025-07-12 19:05:59
Still want to read the full version? Full article
