Her overreliance on short-term borrowing sets taxpayers up for a painful economic reckoning.
The Biden administration’s profligate spending—driving unprecedented trillion-dollar deficits during a full-employment, peacetime economy—has naturally required an increase in borrowing. But the size of Treasury issuance is only one aspect of U.S. borrowing. The way the U.S. borrows is equally important to market assessments of American financial credibility.
Traditionally, the U.S. funds itself mostly with medium-term notes and long-term bonds. The Treasury Department generally refrains from trying to time the market and has instead sought to issue notes and bonds with a stable and predictable rhythm. This approach helps provide orderly benchmark interest rates and lets markets plan for absorbing the significant interest-rate risk that comes with longer-term Treasury securities. This reinforces market stability.
By Dan Katz
Dan Katz is an adjunct fellow at the Manhattan Institute and served as a senior advisor at the United States Department of the Treasury from 2019 to 2021.
