Will the Bond Market Mayhem Make Rich People Want to Pay More Taxes?

We are not going to “grow our way out” of this crisis, no matter what Scott Bessent says. And we’re not going to cut our way out of it, either.

I’ve been wondering lately whether the Great Bond Selloff of 2026 might force rich people to make Sophie’s Choice between low taxes and a stable bond market.

The 10-year Treasury bill’s de-stabilizing climb to a 5 percent yield is driven in large part by President Donald Trump’s tax cuts, which are projected to reduce revenues collected from the richest one percent by a trillion dollars over the next decade, according to the nonprofit Institute on Taxation and Economic Policy. As a percentage of gross domestic product, the national debt exceeds 100 percent and is fast approaching the post–World War II high of 106 percent. In 1946, the national debt was bigger than GDP because the United States had spent the previous five years fighting a world war against Germany and Japan. In 2026, the national debt is bigger than GDP because rich Americans don’t feel like paying taxes. (Gross debt, which adds in funds the federal government owes itself, already exceeds the 1946 level.)

Treasury Secretary Scott Bessent, whose recent bond-buyback scheme to lower Treasury yields is failing, now says “the only way for us to get out of this is to grow our way out of this.” Translation: “I don’t have a clue how to get out of this.” Nobody believes we can grow our way out. According to a July 2026 paper by Harvard’s Karen Dynan and Douglas Elmendorf and Louise Sheiner of the Brookings Institution, faster productivity growth attributable to artificial intelligence would only “slightly reduce the burden of existing debt” and “raise revenue a bit relative to GDP.” One reason is that the labor of the workers AI will lay off is taxed at a higher rate than the capital gains AI will generate. Render human labor extinct and you have no alternative but to raise taxes on capital, assuming you want to have any government at all.

Nobody believes we can cut our way out either. Elon Musk tried and failed spectacularly. His Department of Government Efficiency’s website claims it saved taxpayers $215 billion, which, even if that were true, would be less than half what Trump’s 2025 tax cut cost the Treasury this year alone. And as it happens, it isn’t true. The GAO last month called bullshit on DOGE’s claimed $110 billion in savings from contracts, grants, and leases. Even if you overlook that, the Yale Budget Lab estimates that DOGE’s personnel cuts to the Internal Revenue Service will cost taxpayers $350 billion over the........

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