Last month, in an interview with Tucker Carlson, J.D. Vance said he worried about the U.S. government bond market in the early stages of a Trump presidency. Because of Biden-Harris spending, the U.S. is adding about $2 trillion to the national debt every year, he said, and “The only thing that makes that serviceable is that interest rates are still pretty low.” If interest rates go much higher, say to 8 percent, “that can become a huge spiral that could take down the finances of this country.”
Vance said that international investors and foreign countries — beneficiaries of globalization — could try to take down the new Trump administration by selling U.S. government bonds, which would cause interest rates to rise sharply. Vance noted we saw this in Britain in late 2022, when newly elected Prime Minister Liz Truss came out with a plan of tax cuts and, partly due to the market reaction and partly due to Bank of England actions, British government bond yields spiked, and many investors and pensioners faced large losses. Truss’ government was taken down in less than two months as a result.
Vance said the immediate fix to this bond market risk is twofold. First, staff the Treasury Department with intelligent people. Second, create flat tariffs (not varying in rates for special interests) that can both generate revenue and bring jobs and economic activity back to the U.S., adding to the tax base.
Finally, Vance hinted that spending cuts could be pursued. He
