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Team Trump is battling not only the Democrats and the stock market, but also a huge and unproductive spending spree that Joe Biden unleashed in the final months of his presidency, On The Money has learned.
It was an attempt to goose the economy and the markets – so people could forget Kamala Harris was an empty suit on policy and get her elected last fall.
The good news: It didn’t work for Harris.
The bad news: The bill is coming due.
During the campaign, whispers of Sleepy Joe’s Harris-related spending spree leaked out of the Trump campaign from time to time. But now that the Trumpers are in the White House, they’re starting to tally it up.
The numbers are anywhere between $300 billion and $250 billion depending on how you measure and classify the largesse. Robbert van Batenburg, of the influential Bear Traps market report, says his analysis backs up those estimates. Wall Street executives who delved into the matter say the Bidenistas were able to paper over the spending though the chicanery of rolling over short-term debt instead of issuing longer-dated bonds that would have causes a spike in interest rates, a stock market selloff and probably a recession.
However big the bill, everyone agrees that it’s a lot of money that the bloated federal government doesn’t have. You can’t roll over debt forever because investors get wise to the game and then keep demanding ever higher interest rates to lend the government money.
Team Trump tells On The Money the hole they’re in is large and will take a while to dig out from. They are still rolling over short-term debt because they don’t want to upset the interest rates environment. Meanwhile, they’re banking on the cuts by Elon Musk’s DOGE team are to make sure interest rates don’t blow out to levels that could cause a deep recession because of all the debt and spending.
The numbers don’t lie: A budget deficit approaching $2 trillion (by comparison, Trump’s last pre-COVID deficit was $984 billion) and $37 trillion in debt, which leaves you little choice. It’s either DOGE and other cuts that translate into short-term pain, or a massive spike in interest rates down the road that could lead to a recession or worse.
As I’ve written, the markets are focusing on short-term pain and of course tariffs. Bond trading is signaling a recession, even if the economy was likely slowing before Trump took office in late January. Stocks are freaking out over tariffs because they translate into a surcharge on imports that leads to retaliatory measures from targeted countries then inflation and a possible recession.
Plus, they think the Trump DOGE reduction in government spending – including the end of Biden’s last-minute binge to elect Harris — will slow economic growth.
Rightly or wrongly, Team Trump sees the glass half full. They think they can pay down the deficit and debt with money from tariffs; DOGE could cut $500 billion from the deficit and lower interest rates in the long run, which is also good for growth, as are the planned tax cuts and deregulation.
Interest rates would have blown out if Harris got elected because she was planning to double down on Biden’s idiotic spending.
The trading in the 10-year might be signaling recession, but it’s also signaling the need to issue less debt.
The yield on the 10-year yield that consumer rates are priced off of was heading to 5% because bond traders sniffed out the spending Biden was doing to elect Harris. It’s now heading to 4% and below.
Joe Biden was asleep for most of his presidency – when he wasn’t spending money that he didn’t have. He hasn’t been heard from much now that he’s in retirement, but if he ever manages to wake up from his extended slumber, someone might want to ask him why electing Kamala Harris was worth all that spending and the hole he left for Trump.
