Washington Fuels Inflation in $31 Trillion Economy as Treasury Yields Surge
Updated
Updated · CNN · Sep 3
Washington Fuels Inflation in $31 Trillion Economy as Treasury Yields Surge
2 articles · Updated · CNN · Sep 3
Summary
Persistent inflation is spilling into politics and markets, with Washington still pursuing tax cuts, spending increases and tariffs instead of measures that would cool prices.
Treasury yields have surged in recent months as bond investors demand more compensation for inflation risk, pushing up borrowing costs on mortgages and other consumer loans tied to Treasuries.
The latest fiscal push includes a bill the CBO says will add $4.7 trillion to debt over 10 years, while the administration is also proposing a 40% jump in annual defense spending to $1.5 trillion.
That stimulus is helping keep unemployment low, stocks near record highs and tech investment strong, including $1 trillion in AI infrastructure spending this year, even as prices stay above the Fed's 2% target.
Economists warn the Fed cannot tame inflation alone; with national debt above $40 trillion, prolonged fiscal expansion could eventually force tax hikes and raise the risk of a broader financial or currency crisis.