The first sentence of a NYT article told readers that the White House and Congress are faced with: "anxiety in financial markets about the huge federal deficit and the potential for it to become an electoral liability for Democrats." There is absolutely no evidence whatsoever presented in the article to support this bold assertion. What we know is that investors are willing to hold 10-year Treasury bonds at a 3.5 percent interest rate. This suggests that financial markets are very unconcerned about the deficit and the future prospects for the U.S. government. By comparison, they demanded interest rates of more than 5.0 percent to hold Treasury bonds in the late 90s when the government was actually running surpluses. The higher interest rate suggests a greater level of anxiety. While the financial markets appear unconcerned about the fiscal condition of the United States, there are many wealthy people, who claim to speak for financial markets, who are expressing concern. The NYT should distinguish between the views expressed by these wealthy people (all of whom were too incompetent to see an $8 trillion housing bubble) and reality.
--Dean Baker
