At 3.17 percent, the interest rate on 10-year Treasury bonds is now at about half the level that the Clintonites were celebrating back in the early 90s. The NYT sees this as evidence that "worries rise on the size of U.S. debt." What on earth is the NYT talking about? The focus of the article is a modest increase in the interest rate on 10-year Treasury levels from the extraordinarily low levels they had hit in late 2008. The main reason for the sharp decline in Treasury yields was panic in financial markets that made investors fearful of holding anything other than government debt issued by the United States and other super-safe borrowers. The modest rise in yields to still very low levels was a predictable and desirable outcome of a stabilizing financial market. The Congressional Budget Office projected that the 10-year Treasury rate would rise to an average of 3.4 percent in 2010 and 4.0 percent in 2011. There is a currently a powerful contingent of people trying to spread fear about the government debt in order to advance their agenda of cutting Social Security and Medicare, most prominently investment banker Peter Peterson and the Washington Post. It is therefore especially important that the NYT report on the budget accurately in order to avoid feeding these fears. This article also misrepresents some other aspects of the government's financial situation. For example, it asserts that because most of the rest of the world is in recession there is less money to lend to the United States: "Most of the world is in recession, and other nations have rising borrowing needs as well." In fact, the opposite is the case. It would be harder for the United States to borrow if the rest of the world were growing rapidly and there were many competing demands for capital in both the public and private sectors.
--Dean Baker
