Economist Says Trump Treasury May Be Panicking on Debt

Harvard economist Kenneth Rogoff, writing in an opinion piece, argues that the Trump Treasury may be showing early signs of panic over the scale of U.S. debt, which recently surpassed $40 trillion.

Rogoff notes that Treasury Secretary Scott Bessent has long dismissed debt concerns, insisting that rapid growth will let the U.S. meet its interest obligations without major tax increases or spending cuts. But Rogoff questions why, if that confidence is genuine, Bessent has moved to adjust the maturity structure of government debt — effectively shifting long-term borrowing into short-term debt, similar to the Federal Reserve's quantitative easing.

According to Rogoff, the federal deficit is running at roughly 6% of GDP, and Bessent has promised markets that AI-driven growth will help bring it down to around 3%. Rogoff is skeptical, citing rising costs from an aging population, higher military spending and political pressure for more public spending, alongside the difficulty of taxing AI-driven profits compared with labor income.

The piece also points to a broader shift: the traditional premium enjoyed by U.S. Treasuries as the world's benchmark safe asset has largely disappeared, as long-term interest rates rise globally, not just in the United States.

Rogoff writes that Bessent's shift toward buyback measures — rather than pursuing budget consolidation — is unusual because such tools are typically used during a market panic, and he sees little evidence markets themselves are currently panicking. He warns that the strategy has done little to slow the rise in long-term yields and could undermine Bessent's reputation as a steadying influence within the Trump administration's economic team.

With no significant debt reduction expected before November's midterm elections, Rogoff concludes that bond markets have good reason to remain skeptical of the country's fiscal trajectory.