The Belief That Debts Get Repaid – Why the Bond Market and Even the President’s Own Party Are Losing Confidence in Him – A Warning to AfD Voters

The world is becoming increasingly reluctant to lend money to President Donald Trump’s government, and that hesitation is producing consequences that can no longer be ignored. Interest rates are rising, housing and daily life are becoming more expensive, growth is slowing, and Republicans are facing an additional problem of all times - just ahead of the November midterm elections. The war against Iran pushed energy prices upward, and that increase also spread into the prices of the bonds used to finance the American government. The yield on a ten year U.S. Treasury note has now climbed above 4.44 percent after standing at 3.95 percent before the war began at the end of February. Average mortgage rates have reached their highest level in nine months while automobile sales continue to weaken. This is not purely an American problem. Interest rates have risen in multiple countries because the world is preparing for higher inflation, questioning the sustainability of public debt, and because investment in artificial intelligence has accelerated sharply.

The chart shows that consumer prices for beef in the United States have been rising for years and reached new highs in 2026. The increase is especially visible in steaks: the average price now stands at around 14 U.S. dollars per pound (0.454 kilograms). Ground beef has also become noticeably more expensive compared with the years before 2020. The figures are based on consumer price data from the U.S. Department of Labor.

Trump is trying to reassure Americans. He says he has a plan - although naturally he is not revealing what that plan actually is - to reduce the annual budget deficit of roughly 1.8 trillion dollars. In the past he pointed to revenue from tariffs, payments from foreigners for his so called Gold Card, savings generated by the Department of Government Efficiency, and faster economic growth. The reality: empty promises. Last week he declared that the anti fraud task force led by Vice President JD Vance would create enormous savings. “If he does really great, we’ll have a balanced budget without having to do anything,” Trump said. It is a remarkable promise. A budget that balances itself without anyone actually doing anything belongs to that rare category of government projects whose implementation consists primarily of waiting.

Debt servicing costs have tripled since 2021 and now exceed one trillion dollars annually. President Trump signed a tax cut law that is likely to increase deficits by five trillion dollars over ten years, while tariffs offset only a small portion of that amount. “Under current policy and according to our research, annual deficits are likely to rise above four trillion dollars within a decade.” Deficits are expected to continue growing over the next ten years because the costs of Social Security and Medicare are outpacing tax revenues. Incidentally, this is also the kind of policy the AfD is pursuing.

The yield on the ten year Treasury climbed as high as 4.67 percent in mid May before easing somewhat again while negotiations over a ceasefire with Iran continued. It is the same rise and fall seen in 2025, when rates initially surged because of Trump’s so called Liberation Day tariffs and then began to decline once Trump stepped back from the most aggressive increases. Kent Smetters, who leads the Penn Wharton Budget Model, broke down the numbers behind rising thirty year bond yields. According to his estimate, sixty percent of the increase comes from expectations that America will continue borrowing at unusually high levels, while the remaining forty percent stems from inflation caused by the Iran war and Trump’s tariffs.

There is concern that the United States may no longer possess the same ability it once had to borrow in order to respond effectively to an economic crisis, whether a collapse like 2008 or a shock comparable to the coronavirus pandemic. The financial room that existed in 2008 and 2020 is substantially smaller today, and Washington still lacks serious proposals, good or bad, for solving the problem.

Higher interest rates are giving Democratic candidates in the races for control of the House and Senate another line of attack at a moment when voters are already worried about high food and gasoline prices. In Colorado’s Fifth Congressional District, Democrat Jessica Killin is focusing on the message that persistent deficits and higher interest rates make it harder to buy or renovate a home, afford a new car, and manage credit card debt. Killin, an Army veteran and former close aide to Doug Emhoff, the former Second Gentleman, said: “Things are already expensive. We can talk about gas, but the cost of borrowing only makes it worse.” Joe Reagan, also an Army veteran and candidate for the Democratic nomination, said in an email that he talks “a lot about fiscal stewardship” during his campaign. “Every dollar spent on interest is a dollar that isn’t being invested in infrastructure, education, veterans services, or economic growth,” he said. Both are challenging Republican Representative Jeff Crank in a district their party sees as a possible pickup. Killin called the deficit an example of how “Trump says one thing and does the opposite.” In his address to Congress in March 2025, Trump declared: “In the near future, I want to do what has not been done in 24 years: balance the federal budget. We are going to balance it.” Crank, the Republican incumbent, did not respond to requests for comment. (As of June 1, 10:00 MDT)

The administration insists that it will reduce deficits step by step. As a share of total economic output, last year’s deficit was lower than in 2024, although that decline partly depended on tariff revenues that, following a Supreme Court ruling, are considered unlawful and subject to repayment. Treasury Secretary Scott Bessent pointed last week to a report claiming that up to 500 billion dollars in fraudulent government spending could be eliminated annually, “that would substantially reduce the deficit.” Bessent appears to have based this bold conclusion on a 2024 report by the Government Accountability Office estimating fraudulent spending at between 233 and 521 billion dollars annually. Those figures, however, came almost entirely from the pandemic period, when the government borrowed heavily to stabilize the economy. The White House and the Treasury Department did not answer questions regarding the source of Bessent’s claims. That is probably for the best.

Regarding deficits, Bessent told reporters at the White House that the administration inherited a bad hand from former President Joe Biden, a Democrat. “We inherited the worst budget deficit in history - in history - and that while we were neither in a recession nor at war,” Bessent said. He had previously announced that the administration wanted to reduce the annual deficit to three percent of total economic output. It currently stands at roughly double that level, and when asked for a timeline to reach that goal, Bessent gave no direct answer. Which perhaps says enough.

Investors are still buying shares of American companies and the stock market continues to gain value, something that can be interpreted as confidence in America’s economic potential. Yet the rise in interest rates suggests that those same investors increasingly view government debt as a weakness. Financial markets may ultimately impose enough pain through higher rates to force political leaders to confront the underlying imbalances. Several economists expect markets to force the deficit issue before voters do. The entire bond market system is built on trust that debts will be repaid. The English word “credit” is linked to the Latin root that also gave rise to the word creed. That is what debt ultimately means: “I believe you will pay me back.” “That works until it doesn’t.” It is an old insight that money is not made of metal or paper but of a promise, and that a promise lasts only as long as someone else remains willing to believe in it. Those who treat that promise carelessly usually realize too late that they were never dealing with numbers, but with other people’s belief in their reliability.

That question of trust does not exist only in the bond market. It is now appearing inside Trump’s own party as well, in a place tied as much to money as to loyalty. A conflict remains unresolved between the White House and the Senate. Ten days ago Republican senators defiantly left Washington without passing legislation to fund Trump’s immigration agencies. Republicans returning this Monday say they do not have enough votes for the Department of Homeland Security funding bill unless the White House agrees to place limits on a new 1.776 billion dollar settlement fund intended to compensate Trump allies. Trump has shown little interest in doing so, even after a judge temporarily halted all payouts.

The administration “is going to have to come up with some suggestions and ideas,” Senate Majority Leader John Thune said before the Senate left town on May 21. Thune, from South Dakota, said that settlement money, some of which could potentially go to Trump supporters who beat police officers and attacked the Capitol on January 6, 2021, “just makes everything much harder than it should be.” The stalemate over the so called Anti-Weaponization Fund could become a turning point as Republicans try to preserve their majority in this year’s elections and advance their agenda. Trump’s effort during the campaign year to defeat Republican lawmakers he considers disloyal, including some of Thune’s most dependable allies in the narrowly divided 53-47 Senate, has only intensified tensions. Senators Bill Cassidy of Louisiana and John Cornyn of Texas lost reelection in May after Trump endorsed their primary challengers, and it remains unclear how strongly they will support his agenda moving forward. A growing number of Republican senators have become frustrated because the president is ignoring what they see as their own political realities. “I think it’s difficult to separate anything happening here from what’s happening in the political atmosphere around us,” Thune said.

The Democrats announced that they would introduce several amendments to the immigration bill in order to scale back or eliminate the settlement altogether. Senate Minority Leader Chuck Schumer of New York wrote in a letter to colleagues on Monday morning that Democrats would launch “a coordinated effort to kill the slush fund before one cent goes out the door.” “No matter what Republicans do, we will force them to vote on it,” he wrote. As frustration among Republican senators continued to grow, Trump made clear that he was not especially concerned. “I don’t care about the midterms,” Trump said last week during a discussion about the Iran war. It is a remarkable statement coming from a man whose party must defend its majority precisely in those elections. Anyone who declares elections irrelevant is also saying that accountability itself does not concern him.

“The Iran really wants to make a deal, and it will be a good deal for the U.S. and for those standing with us. But don’t the Dumocrats (Trump’s mocking term for Democrats) and various seemingly unpatriotic Republicans understand that it becomes MUCH harder for me to do my job properly and negotiate when political hacks constantly interfere negatively - to an extent never seen before - over and over again, demanding that I move faster or slower or go to war or not go to war or whatever.

Just sit back and relax, in the end everything will work out - it always does!

(Reality looks different, but Mr. Trump regularly chooses to ignore that. - Editorial note)

At a closed door meeting with acting Attorney General Todd Blanche before leaving town, Republican senators delivered what amounted to an ultimatum: put limits on the settlement, or we will do it for you. Senators discussed several ways to restrict the fund. These included limiting who could receive payouts, changing the makeup of the commission responsible for settlement decisions, introducing judicial review for applicants, or abolishing the fund entirely. Republicans have discussed attaching those restrictions to the otherwise unrelated immigration enforcement bill but would prefer the White House to make the changes voluntarily. There were few signs of progress over the Memorial Day weekend. Senator Todd Young of Indiana said last week that he had seen nothing “that would suggest they sent us a plan our leadership thought was acceptable.” “It’s in their court,” Young said of the White House. Senator Bill Hagerty of Tennessee said on Fox News Sunday that discussions were underway “to get to something that’s going to work.” “I think there were simply more details and more questions last week that needed to be resolved,” Hagerty said, adding: “I’m looking forward to seeing the details this week.”

Blanche said in an interview on Thursday that “a lot of the questions will be answered in the short term.” He would not elaborate further because “talking in hypotheticals isn’t fair to the process.” The meeting with senators before they left town had been “angry,” according to Senator Ted Cruz of Texas, who described it later on his podcast. Of roughly 45 Republican senators present, “at least half of them were blasting the attorney general.” The Senate had planned to remain in session late that evening to vote on the immigration bill, but leadership canceled the votes and sent everyone home. Cruz said Republican senators had been “yelling” and told Blanche that the fund, which originated from the settlement resolving Trump’s lawsuit against the IRS over the release of his tax returns, “feels like self dealing” and “feels like Trump cut a deal with himself.” Cruz, who said he supports the fund, pointed out that Democrats had already announced amendments to eliminate it. Republicans “would have lost every vote” if they had remained in session, he said. He predicted: “We will see the administration announce at minimum a modification, because if they don’t, they’ve got a full on revolt in the Senate.”

Cruz said senators had many questions regarding January 6 defendants and that Blanche assured them nobody who committed violence or assaulted police officers would receive a payout. Publicly, however, Blanche repeatedly refused to say that. “There is no limit to who can apply.” When asked about those who acted violently on January 6, Blanche suggested that defining that category might be too difficult. “Who is it? I mean, you tell me,” Blanche said. “You have to define something and then stick with it. That’s something I’ve been hesitant to do because it’s very fact intensive.” Trump pardoned more than 1,500 defendants charged in connection with the 2021 attack, including hundreds convicted of violently assaulting and injuring police officers while breaking into the Capitol.

At this point the two stories of this day meet. The bond market requires belief that a borrower distinguishes between his own money and the money of others. The Constitution requires belief that an officeholder distinguishes between public duty and personal advantage. A fund through which a president settles his own lawsuit against the state and compensates his allies with public money erases exactly that distinction. Senator Cruz, despite supporting the fund, described it in a sentence worth remembering: a deal with himself.

The dispute over the fund follows another retreat. Republicans had already abandoned one billion dollars in security funding for the White House, including money for Trump’s new ballroom, because Democrats and some Republicans questioned using taxpayer dollars for such a massive project during a period of economic pressure. Alongside the settlement, Democrats had planned to force Republican senators into a vote on the ballroom funding. Remaining in the legislation is funding for Immigration and Customs Enforcement and Border Patrol, which Democrats have blocked for months in protest of the administration’s immigration crackdown. Republicans are using the budget procedure known as reconciliation to fund those agencies through the end of Trump’s term without Democratic support. Success, however, requires Republican unity and ultimately Trump’s signature. Democrats hope their Republican colleagues continue resisting the White House. Senator Gary Peters of Michigan said last week that the settlement fund is “probably one of the most corrupt things we’ve ever seen an American president do.” For some of his Republican colleagues, he said, it appears to be “a bridge too far.” “I hope they realize that what was done is simply unacceptable and that they stand firm,” Peters said.

Both stories revolve around the same substance. Whoever lends money believes repayment will happen. Whoever gives loyalty believes in reciprocity. German uses one word for both ideas: a creditor is someone who gives money, and someone who trusts is also a believer. The bond market shows that the first form of belief is beginning to weaken, and the unrest inside the Senate shows the second one is no longer automatic either. Hubbard’s sentence applies in both cases and without exception. It works until it doesn’t. A president who says midterm elections do not matter to him seems to forget that he depends on two kinds of creditors: those who lend him money and those who lend him their votes. Both ultimately ask for the same thing - certainty that he will repay what he owes.