Last year, Nobel Prize-winning economist Paul Krugman warned that President Donald Trump’s economy was starting to have conditions similar to those that existed before the onset of the Great Recession in 2007. Now a center-right think tank has revealed that a key data point in the American economy is eerily similar to the pre-Great Recession status quo.
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“On July 31, 2026, the 30-year Treasury bond yield closed at 5.27 percent, its highest mark since 2007,” reported the Peter G. Peterson Foundation on Wednesday. “While there are many interactive and complex factors in the global economy that affect the interest rate environment, investors are demanding higher compensation for holding U.S. debt. As ratings agencies have serially warned, U.S. debt growth is unsustainable, and global investors appear to be weighing the risks of financing U.S. deficits more heavily.”
They added, “These pressures have only intensified since July. On August 19, the U.S. Treasury announced that starting September 9, it would ‘at least double’ the size of its long-dated security buybacks in an effort to lower yields. While yields briefly dipped, they rebounded by the next day, reflecting the fundamental forces that drive bond prices, including continued market worry about the state of U.S. finances.”
The report proceeded to explain why Trump’s bond yield rates are so problematic for the economy as a whole.
“A critical, cyclical relationship exists between debt, interest rates, and interest costs,” the report argued. “All else equal, as debt increases, bond purchasers demand greater yields which makes it more expensive to borrow.”
It continued, “While this pattern has been historically proven across many countries over time, today’s higher yields and increasing interest costs are actually a return to trends that prevailed prior to the Great Financial Crisis. For more than a decade, the United States was able to borrow cheaply, at well below preceding historic norms, despite increasing debt. The pandemic, the spending that followed, consistent above target inflation since 2021, and projections of continued large deficits into the future have pushed the US towards back to the historical norm.”
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It concluded by pointing out that two of the three factors causing the ongoing strain to the bond market, the Iran War and the tariffs, can be directly placed at Trump’s feet.
“Current economic events, including the Iran War, tariff refunds, and persistent inflation, are significant contributors to the interest rate environment; the nation’s fiscal outlook is also driving long-term bond prices upward,” the report declared. “The United States will spend more than $16 trillion on net interest costs over the next decade — but that is a conservative estimate, and those costs could be higher if rates rise further. The August buyback episode should send a loud and clear message to policymakers that instead of attempting to control prices, a more constructive approach is to address the structural forces driving deficits and the debt higher.”
Speaking to AlterNet in August, a top economist who helped craft the economic conditions that led to four budget surpluses observed that the size of America’s deficits — which Trump has exploded — has so drastically ballooned that the bond markets can’t help but react to them.
“In politics, you generally only notice the cost of deficits once that cost becomes very large,” Dr. Robert J. Shapiro, who served as President Bill Clinton’s Under Secretary of Commerce for Economic Affairs and advised his successful 1992 campaign, told AlterNet. “That’s why the bond market is noticing it now — the deficit has gotten so large, and it’s happening at a time of rising inflation, which is the other element here.”
He added, “Our tax burden — all taxes at every level, as a share of GDP — is smaller than that of any other developed nation comparable to the United States.We have become an outlier in all of these ways, and the bond market is beginning to say: you can’t sustain this. We are playing with dynamite.”
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