{"id":11096,"date":"2025-07-09T08:46:37","date_gmt":"2025-07-09T08:46:37","guid":{"rendered":"https:\/\/bluelightnews.com\/category\/politics\/wall-streets-debt-warnings-went-unheeded-as-gop-pushed-megabill-forward\/"},"modified":"2025-07-09T08:46:37","modified_gmt":"2025-07-09T08:46:37","slug":"wall-streets-debt-warnings-went-unheeded-as-gop-pushed-megabill-forward","status":"publish","type":"post","link":"https:\/\/bluelightnews.com\/category\/politics\/wall-streets-debt-warnings-went-unheeded-as-gop-pushed-megabill-forward\/","title":{"rendered":"Wall Street\u2019s debt warnings went unheeded as GOP pushed megabill forward"},"content":{"rendered":"
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As congressional Republicans advanced their megabill in recent months, many fiscal hawks in the party figured they had a powerful force on their side: wary titans of finance who had started sending powerful signals that their appetite for purchasing U.S. debt was not, in fact, endless.<\/p>\n

Turns out Wall Street was barely a bump in the road.<\/p>\n

In passing the One Big Beautiful Bill Act<\/a> last week, GOP leaders blew past a host of warnings to potentially add several trillion dollars of additional borrowing \u2014 brushing off concerns that they were missing a late opportunity to put the nation on a more sustainable fiscal trajectory in favor of piling on expensive new tax cuts.<\/p>\n

The whole episode was a stark display of how short-term rewards and Trump\u2019s demands outweighed any anxieties about long-term calamity \u2014 even from a constituency as powerful as Wall Street, whose major players are reliable financiers for politicians of both parties.<\/p>\n

Some heavyweights like JPMorgan Chase CEO Jamie Dimon and billionaire investor Ray Dalio emerged as clarion voices for fiscal rectitude. Many others kept quiet on macroeconomic issues and advocated instead for the extension of tax cuts to promote economic growth \u2014 and, frequently, their own personal welfare.<\/p>\n

Rather than send a big, beautiful signal to the bond markets that discipline would finally be restored, Republicans appear to have done the opposite: Yields on 10-year Treasuries have crept up around 18 basis points over the past week as market watchers ingested tariff news, but also openly wondered if either party is capable of reigning in the roughly $36 trillion national debt<\/a>.<\/p>\n

\u201cIf one of the goals was to calm the bond market down, I wouldn\u2019t take much comfort from the past couple of days,\u201d said economist Ed Yardeni, who coined the term \u201cbond vigilantes\u201d to describe investors who undertook massive selloffs of bonds to protest Fed policies in the 1980s.<\/p>\n

\u201cThe act is not designed as a deficit reduction act. It\u2019s designed as, \u2018Let\u2019s cross our fingers and hope that lower taxes boost economic growth again fast enough to bring in revenues,\u2019\u201d he added.<\/p>\n

\u201cGrowth\u201d was the word repeatedly invoked<\/a> by President Donald Trump and his allies on Capitol Hill, who relied on rosy economic projections<\/a> developed inside the White House to argue that the bill\u2019s tax cuts would essentially pay for themselves.<\/p>\n

Outside observers saw an entirely different kind of growth: Independent forecasters \u2014 including the nonpartisan in-house scorekeepers at the Congressional Budget Office \u2014 predicted the added debt created by the bill would increase federal borrowing costs, swamping any economic gains reaped through the tax cuts.<\/p>\n

It\u2019s a version of the \u201cdebt spiral\u201d that many fiscal doomsayers have warned the U.S. might be entering after spending decades as the world\u2019s safest investment. Lawmakers heard those calls loud and clear at various points recently.<\/p>\n

In May, Moody\u2019s Ratings downgraded Treasuries from their prior top rating, citing \u201cpersistent, large fiscal deficits [that] will drive the government’s debt and interest burden higher.\u201d In late March, a group of House Republicans heard directly<\/a> from Dalio, who urged them in a private briefing to start bringing annual deficits down to 3 percent of GDP. Deficits are currently running more than twice that<\/a>.<\/p>\n

Members were already spooked by the spike in Treasury yields after Trump rolled out his sweeping \u201cLiberation Day\u201d tariffs in April. Dalio told them that an even steeper selloff could occur if they didn\u2019t get the nation\u2019s fiscal house in order. The concern seemed to be confirmed when yields for 20 and 30-year Treasuries closed out above 5 percent<\/a> the day that the House passed the sweeping legislation.\u00a0<\/a><\/p>\n

Still, the GOP did not end up heeding Dalio\u2019s warning, and last week he said on X that he now expects sizable increases<\/a> of government debt relative to GDP. That, in turn, would lead to \u201cunimaginable\u201d tax increases or spending cuts \u2014 or, perhaps more likely, inflationary money-printing.<\/p>\n

He said that \u201cbig, painful disruptions will likely occur\u201d if lawmakers can\u2019t bring the deficit down to 3 percent of GDP.<\/p>\n

Earlier on, GOP lawmakers on the House Budget Committee Republicans had taken Dalio\u2019s message to heart, and his March briefing was part of what led House Budget Chair Jodey Arrington<\/a> (R-Texas) and Budget Vice Chair Lloyd Smucker<\/a> (R-Pa.) to craft a provision in the House bill linking the amount of tax cuts to spending cuts in the domestic policy legislation.<\/p>\n

But when the Senate took up the House products, Senate Republicans added hundreds of billions in tax cuts to the legislation while jettisoning north of $200 billion in spending cuts because they didn\u2019t adhere to Senate budget rules. With pressure from the White House, Senate Republicans forced their product down the throats of fiscal hawks in the House.<\/p>\n

As a result, the bill ended up missing the mark on the House framework by around $600 billion dollars, according to the nonpartisan Committee for a Responsible Federal Budget.<\/p>\n

\u201cThe one piece that I wish was stronger coming out of the Senate was the offset provision, the deficit-neutral principle that was hard-wired into our budget resolution,\u201d Arrington said in an interview after the House passed the final legislation.<\/p>\n

Arrington, who authored an austere balanced budget he dubbed \u201cReverse the Curse\u201d before ultimately supporting Trump\u2019s deficit-busting bill, said he was \u201cnot sure either party is unilaterally\u201d capable of changing the nation\u2019s fiscal path. He suggested Congress would have to turn to a bipartisan commission, similar to one established in 2010<\/a> under former President Barack Obama, to address the issue.<\/p>\n

Outsourcing the hard trade-offs necessary for deficit reduction is one thing; mustering the political will to enact them is another. The megabill drama showed that the issue is hard to crack for even the most powerful lobbies, said Andrew Moylan of Arnold Ventures, a think tank endowed by billionaire investor John Arnold that advocated an array of policies to help close the fiscal gaps in the GOP\u2019s megabill.<\/p>\n

\u201cI think that it’s going to be difficult for any actor, whether it’s a Wall Street person or a policy organization or grassroots group or whatever, to have an impact on this debate that helps us reduce deficits unless constituents are feeling pain that they feel like Congress needs to help address.\u201d<\/p>\n

Some in the House GOP are hoping that they\u2019ll have a chance to enact additional spending cuts in further party-line bills this year as well as through the appropriations process. Many conservatives said they were reassured by 11th-hour conversations they had with White House budget chief Russ Vought before the final vote.<\/p>\n

\u201cYou\u2019re going to see a lot of fiscal restraint to add to this growth picture,\u201d said Rep. Andy Barr<\/a> (R-Ky.), a House Financial Services Committee member. \u201cSo growth, fiscal restraint \u2014 that will ultimately send the virtuous signal to the bond market.\u201d<\/p>\n

Barr said he also supports updating leverage requirements for banks to encourage them to purchase more Treasuries, which could help bring yields down.<\/p>\n

As for Democrats, Rep. Ro Khanna<\/a> of California laid out a progressive debt reduction plan in June that would cut the deficit by $12 trillion through reforms to defense contracting, a crackdown on \u201ccorporate profiteering\u201d in Medicare and tax hikes for billionaires and companies.<\/p>\n

In an interview Monday, Khanna predicted that serious deficit reduction would most likely occur under a Democratic trifecta rather than as part of a bipartisan effort.<\/p>\n

Republicans, Khanna said, \u201chave to be willing to raise taxes on the wealthy. That\u2019s a philosophical difference. The math just doesn\u2019t work without raising taxes on the wealthy.\u201d<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

As congressional Republicans advanced their megabill in recent months, many fiscal hawks in the party figured they had a powerful force on their side: wary titans of finance who had started sending powerful signals that their appetite for purchasing U.S. debt was not, in fact, endless. Turns out Wall Street was barely a bump in […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-11096","post","type-post","status-publish","format-standard","hentry","category-congress"],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/bluelightnews.com\/category\/politics\/wp-json\/wp\/v2\/posts\/11096","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bluelightnews.com\/category\/politics\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bluelightnews.com\/category\/politics\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bluelightnews.com\/category\/politics\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/bluelightnews.com\/category\/politics\/wp-json\/wp\/v2\/comments?post=11096"}],"version-history":[{"count":0,"href":"https:\/\/bluelightnews.com\/category\/politics\/wp-json\/wp\/v2\/posts\/11096\/revisions"}],"wp:attachment":[{"href":"https:\/\/bluelightnews.com\/category\/politics\/wp-json\/wp\/v2\/media?parent=11096"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bluelightnews.com\/category\/politics\/wp-json\/wp\/v2\/categories?post=11096"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bluelightnews.com\/category\/politics\/wp-json\/wp\/v2\/tags?post=11096"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}